MedPacto, a KOSDAQ-listed company developing immuno-oncology substances, has submitted a proposal to amend its articles of association at the upcoming regular general meeting of shareholders. The proposal includes adding e-commerce and mail order to its business objectives.
The reason MedPacto has ventured into businesses far from its existing new drug development is cited as its status as a technology exception listed company. The exemption for sales revenue requirements as a listed company lasted for five years after the technology exception listing, but this period ended last year. From this year, companies must achieve annual sales of over 3 billion won to avoid being designated as a management item.
MedPacto has yet to generate any sales since its listing. In a challenging environment where it is difficult to quickly increase sales from new drug development, alternative options were needed.
Technology exception listed companies that entered the KOSDAQ market five years ago amid the bio boom are moving quickly to avoid being designated as management items. Previously, they could maintain their KOSDAQ listing even without meeting sales conditions, but from this year, they must generate annual sales of over 3 billion won to keep their listing.
According to the Korea Exchange, the number of new technology exception listed companies exceeded 20 for the first time in 2018, increasing to 21 in 2019, 25 in 2020, and 31 in 2021. Among these, the companies listed in 2020 lost their exemption benefits last year.
The technology exception listing system allows companies with technology to easily raise funds in the stock market even if they cannot generate immediate profits. Biotech companies, which needed substantial funds for research and development but had difficulty producing results, entered the stock market in droves through this system. Of the 25 companies that went public under the technology exception style in 2020, 16 were biotech firms.
However, there are quite a few companies that have not generated revenue even five years after their listing. With urgency intensifying, technology exception listed companies are preparing self-help measures, such as amending their articles of association to add new businesses ahead of their general meetings. The fields these companies are primarily entering include cosmetics, health supplements, and distribution, which are relatively quick to yield profits.
VaxCell-Bio, which develops anti-cancer immunotherapy agents, is also expected to amend its articles of association at its general meeting to enter the wholesale business for health foods and cosmetics. VaxCell-Bio's sales last year amounted to 1.9 billion won, falling short of 3 billion won.
There are also cases where companies are embarking on mergers and acquisitions (M&A) to rapidly increase sales. Tiumbio, which develops treatments for rare and intractable diseases, absorbed the OEM cosmetics company Petraon at the end of last year. Petraon's 2023 sales amount to 4.4 billion won, and through this merger, Tiumbio can immediately increase its sales scale.
In addition, KOSDAQ technology exception listed companies are exempt not only from the sales revenue requirement (5 years) but also from the loss requirement (3 years). Essentially, companies whose exemption from the sales revenue requirement ends this year should have already met the loss requirement starting in 2023.
The loss requirement mentioned here means that if the proportion of 'continuing business losses before corporate tax deductibles' exceeds 50% of capital twice or more in the past three years, the company will be designated as a management item. If this reason is not resolved after being designated, it could lead to delisting.
Among the companies that must achieve sales of 3 billion won this year, some have already failed to meet the loss requirements and have been under the Korea Exchange's scrutiny for designation as management items. SCM Lifescience and Kainos Medicine are currently under such scrutiny. If this fact is confirmed through the audit report due by the end of this month, they will be designated as management items.
As the likelihood of designation as management items increases, both companies have rolled out plans for capital increases this month. By expanding capital through this method, they can reduce the loss ratio. However, amid a difficult situation in reversing the declining stock prices, concerns about funding are growing as the completion of the capital increase is being delayed.
As the number of technology exception listed companies steadily increases, the movement of these companies to boost annual sales and improve loss ratios is expected to intensify. A financial investment industry official noted, "Investors should keep in mind that technology exception-listed companies may suddenly announce new business endeavors or funding plans ahead of their regular shareholders' meetings."