As setbacks such as clinical trial failures and rejected approvals from the U.S. Food and Drug Administration (FDA) pile up, chief executives of Korean biotech firms are successively buying their own companies' shares. With investor sentiment sharply weakening, the move is intended to demonstrate a commitment to boosting corporate value and to responsible management. However, some point out that while the purchases may have a short-term effect, a genuine share-price rebound ultimately requires concrete results such as clinical data and business development achievements.
According to the pharmaceutical and biotech industry on the 4th, chief executives at 15 Korean biotech companies bought their own companies' shares last month. The heads of LigaChem Biosciences, NGeneBio, Cellid, Mezzion, GI Innovation, DXVX, ToolGen, GeneMatrix, Frombio, HLB, ABION, Peptron, rznomics, Kolon TissueGene and Y-Biologics joined the buying spree. This was the largest monthly figure so far this year.
In detail, management including Kolon Vice Chairman Lee Kyu-ho bought about 260 million won worth of Kolon TissueGene shares on the open market on the 27th of last month, following the failure of TG-C's U.S. Phase 3 clinical trial. Jeon Seung-ho, chief executive of Kolon TissueGene, explained through a video on the company's official website that "other inside directors will also join the purchases as soon as they are ready." After the FDA once again failed to approve the liver cancer drug rivoceranib, HLB Group Chairman Jin Yang-gon also bought a total of about 140 million won worth of affiliate shares over the 20th and 21st of the same month.
In addition, Peptron CEO Choi Ho-il bought about 1.06 billion won worth of company shares on the open market on the 14th, after the company's stock hit its daily lower limit following his remark at a forum held in Daejeon on the 9th of last month that "terze (tirzepatide) is not included." Peptron is jointly researching long-acting drug delivery technology with Eli Lilly of the United States, and the market expects Mounjaro (whose active ingredient is tirzepatide) to be part of the research. Beyond these cases, many executives also stepped in to buy shares as their stock prices declined over an extended period despite the absence of clear negative news.
As investor sentiment surrounding the biotech industry has frozen, share purchases by chief executives have been on the rise. In June, the heads of 10 companies bought their own companies' shares, including Mezzion, Cellid, DXVX, Inventage Lab, Y-Biologics, TiumBio, ABION, HLB Therapeutics, CG Inbits and Pharos iBio. In May, before that, only two companies, NeoImmuneTech and ABION, were tallied. Last month, the KRX Health Care Index recorded around the 3,400 level, down nearly 40% from the 5,700 level in February. Compared with the 4,200 level in July last year, the figure was also down about 20%.
The reason chief executives have personally stepped in to buy shares is analyzed to be that, in addition to fundraising becoming more difficult, talent recruitment could also be disrupted. An executive at a Seoul-based biotech firm lamented, "Employees' stock option exercise prices are about twice the current share price, so I have many concerns that it will affect not only employee morale but also work efficiency." In the case of InToCell, the company's share price at one point fell below the acquisition cost of its employee stock ownership association. At ABION, despite the CEO's purchase of company shares, forced selling occurred due to the stock price decline in May and June, causing the number of shares held to decrease again.
Experts pointed out that while executives' share purchases can demonstrate a commitment to responsible management in the short term, share-price recovery ultimately depends on clinical data, approval processes and business results. Lee Seung-gyu, standing vice chairman of the Korea Biotechnology Industry Organization, stressed, "Executives' purchases of company shares are positive in that they represent responsible management for market stability and shareholder communication," while adding, "It is important to consistently present concrete results and plans to the market in the process of clinical trials, approvals and business development."
