DXVX, a drug development company with major shareholder Im Jong-yun, the eldest son of the late Lim Sung-ki, founder of Hanmi Pharmaceutical, closed at the lower limit on the 14th. This was a reaction to the announcement made the day before regarding the possibility of being designated as a management item.
In the past, DXVX faced crises due to poor performance and continued losses before Im Jong-yun stepped in as a savior, and trading resumed. However, this time, Chairman Im himself is in a difficult situation, having stepped down from the board of Hanmi Science amid a management dispute within Hanmi Pharmaceutical.
◇ Im Jong-yun's grand operation to save DXVX
DXVX is essentially Im Jong-yun's personal company. The chairman, known for his connections in China within Hanmi Pharmaceutical Group, established the Coree Company in Hong Kong in 2009 and acquired DXVX (formerly Cancerop), which had been delisted. In 2021, he secured a 19.57% equity in DXVX by contributing part of his shares in Hanmi Science as an in-kind investment. Subsequently, he initiated management changes and diversified business structures to pursue growth.
However, DXVX's performance has deteriorated year after year. The net loss, which stood at 7.8 billion won in 2021, increased to 27.8 billion won in 2023, and the provisional results for last year, as announced by the company on the 13th, showed a sharp increase to 49.9 billion won. Given that the continuing projects loss ratio before tax deductions is expected to exceed 50% for both 2023 and last year, the company proactively disclosed concerns about being designated as a management item.
As the situation continued to worsen, in September of last year, amid a management dispute, Im provided financial support to DXVX through another one of his personal companies, Coree Company. Coree participated in a rights offering of 42.4 billion won, and DXVX stated it would use the funds for debt repayment, research and development, and personnel expenses. Chairman Im's equity percentage decreased as he could not participate in the rights offering due to the need to resolve substantial inheritance taxes, but thanks to Coree's participation, he maintained control over DXVX.
DXVX explained that the performance degradation resulted from increased investment in research and development, but in the pharmaceutical industry, the extensive business expansion and failure in cost management relative to the company's size were cited as the reasons.
The underperformance of DXVX's medical diagnostics division is also cited as a background issue. The main business of this division includes gene analysis diagnostics, such as prenatal and postnatal newborn tests based on life-genomic data, accounting for 37% of sales with 12 billion won in revenue in 2022, but exports sharply declined, leading to a significant decrease in 2023.
The company's primary pipeline (new drug candidates) in obesity is still far from yielding results. DXVX is developing an oral medication to differentiate itself from existing glucagon-like peptide 1 (GLP-1) based obesity treatments, but it is currently in the preclinical trial stage. In 2023, it acquired Evixgen, a new drug development company specializing in ophthalmic diseases, and at the end of last year, it introduced the anticancer vaccine 'OVM-200' from Oxford Backmedics, but this is still ahead of the phase 1b trial. The mRNA-based anticancer vaccine being developed with Hanyang University as a government project is still in the preclinical stage.
In response, a DXVX official noted plans to overcome the crisis through global technology transfer agreements. The company is pursuing technology transfers related to mRNA vaccine materials that can be stored at room temperature for a long time, brought in from Pohang University of Science and Technology, as well as reagents used for genome testing services for mothers and infants. They are currently signing non-disclosure agreements (NDAs) with global pharmaceutical companies for technology exports and are expecting due diligence in the technology sector.
A DXVX official stated, "The platform for technology export we are currently pursuing is a technology that can be commercialized immediately, unlike the long development times of new drug pipelines," adding, "We will strive to alleviate the concerns of our shareholders by achieving good business results this year."
◇ Im Jong-yun watching over Beijing Hanmi... DXVX's fate is at stake
The fate of DXVX effectively depends on whether Im Jong-yun provides support, according to market expectations in the pharmaceutical and investment sectors. The problem is that Chairman Im's capabilities are not what they used to be. He was busy last year preparing for a substantial inheritance tax. The lawsuit filed in March of last year for the repayment of 26.6 billion won lent by Im Joo-hyun, vice chairman of Hanmi Pharmaceutical Group, was also a blow.
The key issue is whether Chairman Im can properly support DXVX through Beijing Hanmi. Beijing Hanmi is a company established by Hanmi Pharmaceutical in partnership with China's state-owned enterprise Huayun Zhaojuyue. It is reported that Im Jong-yun's influence is strong there.
In fact, during the management dispute, Locomotive, which had been acting as Chairman Im's spokesperson, issued a press release stating that he had been appointed as co-chairman of Beijing Hanmi. Locomotive announced that Beijing Hanmi had completed the registration of three new directors: Kwon Yong-nam, head of the management support department, Seo Young-eun, head of the research and development center, and Lee Seon-ro, representative of Coree Italy.
Following this, Hanmi Pharmaceutical promptly released a clarification statement, downplaying the significance of Chairman Im's appointment as co-chairman of Beijing Hanmi. A Hanmi Pharmaceutical official stated, "Hanmi Pharmaceutical holds 73.7% equity in Beijing Hanmi Pharmaceutical," and added, "We will provide an official position after further organization," indicating that even if Chairman Im rises to the co-chairman position of Beijing Hanmi, it may be challenging for him to operate the company as he wishes.
In the pharmaceutical industry, there is a view that if Chairman Im takes control of Beijing Hanmi, additional support for DXVX may also be possible. One of Beijing Hanmi's distributors, a company named Obmam Hong Kong, is an affiliate of Coree Company and participated in the convertible bond (CB) issuance of DXVX in March of last year, providing financial support.