Sam Chun Dang Pharm, whose stock price has surged nearly fourfold since the start of the year, took a hard line, saying it would file a complaint against a blogger who raised stock manipulation allegations.
Sam Chun Dang Pharm's share price started in the 240,000-won range at the start of the year and on the 30th of last month jumped more than 380% to 1,184,000 won.
Expectations over "the world's first oral insulin development" and "technology export," among others, had driven up the company's stock. On the 25th of last month, its market capitalization topped 20 trillion won, taking the No. 1 spot on KOSDAQ.
Then, on the 31st, just four trading days later, the company's share price hit the lower limit.
It was seen as the result of profit-taking after the upward catalyst faded following news of a U.S. license (technology export) deal related to oral diabetes and obesity treatments. Some in the market also raised doubts, including assessments that the size of the deal with the U.S. partner fell short of expectations.
In response, the company announced it would file a criminal complaint against a blogger who raised stock manipulation allegations. On the 30th, the blogger posted "Request to investigate KOSDAQ No. 1 stock manipulation," alleging that Sam Chun Dang Pharm was suspected of stock manipulation in cases including a noninvasive blood glucose meter, a COVID-19 vaccine contract, an oral insulin contract, S-pass, and an Eylea biosimilar called Vgenfli. As of the 30th of last month, the blogger had 604 subscribers.
The company's hard-line response did not stop there. On the 1st, Sam Chun Dang Pharm said, "We have initiated civil and criminal legal action over false information disseminated by a certain securities firm analyst."
Amid such responses, there are also signs in the market that trust in the company is further wavering.
On online communities, reactions poured in that "it is unusual for the company to pursue legal action instead of giving proactive explanations to questions that any market participant could raise."
In particular, some pointed out that the company's disclosure track record and key business metrics have not sufficiently supported trust.
◇ 23 "unconfirmed" disclosures over 3 years… repeated hope-inducing filings
The Korea Exchange (KRX) issued a notice that Sam Chun Dang Pharm may be designated as a company with inadequate disclosures. The reason cited was failure to implement fair disclosure of forecasts or projections on operating results. The date of occurrence was Feb. 6. The deadline to decide on the designation is the 23rd.
On Feb. 6, Sam Chun Dang Pharm distributed a press release containing Canadian market results for its Eylea biosimilar, a treatment for wet age-related macular degeneration. It said that three months after reimbursement listing in Canada, it achieved 9.7 billion won in sales with an operating margin of 60% and secured a confirmed purchase order (PO) for 750,000 vials this year. It also offered a projection that it would exceed its sales target.
The stock reacted immediately to the news. Sam Chun Dang Pharm fell as much as 7.9% to 457,500 won early in the session from the previous day, then rebounded intraday to 519,000 won after related reports came out. The intraday swing alone exceeded 12 percentage points. It closed at 500,000 won, up 0.7%.
This is not the first time Sam Chun Dang Pharm has faced disclosure controversies. An analysis of its past 10 years of disclosures on the Financial Supervisory Service's electronic disclosure system found that the company repeated "unconfirmed" explanatory disclosures 23 times over about three years related to the so-called "oral insulin investment attraction rumor."
On May 3, 2021, Chief Executive Jeon In-seok of Sam Chun Dang Pharm said in a media interview, "We plan to establish a joint venture (JV) with China's No. 1 insulin seller to begin phase 1 clinical trials for oral insulin in the second half," adding, "The Chinese clinical expense, amounting to 100 billion won, will be fully covered by that pharmaceutical company."
But the next day, the company issued an "unconfirmed" disclosure on the matter. It said it was in talks with a Chinese company, but that specifics had not been finalized. Even so, expectations that the investment would materialize grew and the stock rose. On May 3, 2021, the company's shares had fallen to 48,250 won, then jumped to 55,200 won the day after the report, and continued climbing to 63,500 won on the 18th of the same month.
From May 2021 to April 2024, Sam Chun Dang Pharm repeated "unconfirmed" disclosures a total of 23 times on the same issue. The phrase "in talks" continued to appear in company filings, but the outcome was disappointing. In a May 2024 disclosure, the company said negotiations on the contract had effectively been halted. It said it sought to proceed with a final contract by changing the terms, but talks fell through as the Chinese side insisted on signing after completion of phase 1.
Of course, various variables can arise in contract matters until they are signed. Under Korea Exchange (KRX) rules, re-disclosure is possible if a "rumor/report explanation" is unconfirmed. However, considering how many other corporations respond to and conclude rumor-related contract matters, many view it as unusual that the same issue would be repeated over several years.
An investor relations officer at a corporation said, "Even if there is no formal problem, repeated media reports that stoke expectations and unconfirmed disclosures without substantive progress can mislead investors and ultimately lead to a loss of trust."
◇ R&D investment down 70% over four years
What recently propelled Sam Chun Dang Pharm's stock was anticipation for developing generics of oral insulin and an obesity treatment (Wegovy). For pharmaceutical and biotech companies, the key metric for gauging "future growth potential" is R&D investment.
However, the company's research and development (R&D) investment has been declining every year. Sam Chun Dang Pharm's R&D spending fell by about 70% over the past four years.
According to Sam Chun Dang Pharm's business report, consolidated research and development expenses fell 67% from about 46.6 billion won in 2021 to 15.6 billion won last year. As a share of total sales, R&D also dropped by 21 percentage points, from about 28% in 2021 to 7% last year. This contrasts with domestic pharmaceutical companies' emphasis on R&D investment.
The share of research and development staff within the overall workforce is also not high at 6% to 8%. In 2021, Sam Chun Dang Pharm had only 24 R&D personnel out of 388 total employees. Last year, it had 35 R&D staff out of 426 total employees. One held a doctorate, while the rest were master's degree holders (25) and others (9). At the shareholders meeting on the 30th of last month, shareholders questioned whether the research staff size was relatively small. A Sam Chun Dang Pharm official said, "We also collaborate with overseas researchers."
On the 19th of last month, Sam Chun Dang Pharm applied to the European medicines regulator for approval of a clinical trial plan for oral insulin. Existing diabetes patients have injected insulin into the abdomen or thighs. The company says it is developing oral insulin using its own S-Pass platform. Approval has not yet been granted by the European regulator. But once the news broke, the stock soared.
Meanwhile, on the 31st of last month, Chief Executive Jeon In-seok of Sam Chun Dang Pharm said in an urgent message that she was "watching the stock's movement with a devastated heart." Jeon said, "This trial is a temporary growing pain we are experiencing as we strive to leap into a global big pharma." Sam Chun Dang Pharm did not answer questions related to research and development.
On the 30th, Sam Chun Dang Pharm disclosed that it signed a license deal with a U.S. partner for generics of the oral diabetes drug "Rybelsus" and the oral obesity treatment "Wegovy Oral."
The total milestone payment for this deal is $100 million (about 150.8 billion won), to be paid based on stage-by-stage development and approval achievements. The company said there is no obligation to return the milestones. It did not disclose the counterparty or whether an upfront payment was made.