Executives at bio corporations are buying their own shares one after another. Kolon TissueGene(950160) stumbled in phase 3 trials for an osteoarthritis treatment, and HLB(028300) failed to win approval for a new liver cancer drug from the U.S. Food and Drug Administration (FDA), souring overall investor sentiment toward biotech stocks. Analysts said executives are purchasing treasury shares to defend against falling prices, but the effect appears limited.
◇ Kolon TissueGene's U.S. trial setback… Vice Chairman Lee Gyu-ho buys 200 million won
According to the Financial Supervisory Service's electronic disclosure system on the 4th, Kolon Vice Chairman Lee Gyu-ho bought 13,158 Kolon TissueGene Korean Depositary Receipts (KDRs) on the market on the 27th at an average of 15,200 won. Lee, the eldest son of Kolon Group Honorary Chairman Lee Woong-yeol, serves as an inside director at Kolon TissueGene.
Lee previously held no Kolon TissueGene equity, but he purchased 200 million won worth this time to secure 0.02%. A Kolon TissueGene official said, "He bought treasury shares for responsible management and shareholder value," adding, "It was an expression of commitment to the osteoarthritis treatment TG-C (formerly Invossa)."
Earlier, Kolon TissueGene said TG-C failed in its first attempt at a U.S. phase 3 trial. Patient pain improved, but it was not more effective than a placebo. Kolon TissueGene's closing price fell more than 76% from the 20th of last month, when the news broke, to the 3rd of this month.
On an online stock discussion board, a post read, "My shares have become scraps of paper." The company is conducting two phase 3 trials in the United States. It will disclose key indicators for the second phase 3 in Oct.
◇ HLB fails U.S. approval for the third time… Chair Jin Yang-gon buys affiliate shares
HLB Group Chair Jin Yang-gon also recently bought about 200 million won worth of affiliate shares. On the 22nd and 23rd of last month, he purchased HLB Therapeutics(115450) (34,081 shares), HLB Genex(187420) (50,428 shares), and HLB Panagene(046210) (58,000 shares) at 1,065 to 1,705 won per share. His equity in HLB Therapeutics rose from 0.42% to 0.46%. HLB Genex increased from 2.33% to 2.48%, and HLB Panagene from 0.89% to 1.01%.
Previously, HLB's new liver cancer drug Rivoceranib failed to receive U.S. FDA approval. It applied for a regimen used in combination with Camrelizumab from China's Jiangsu Hengrui Pharmaceuticals, but this was the third failure. HLB's closing price on the 10th of last month, when the news broke, fell by nearly 30% from the previous day. HLB Therapeutics, HLB Genex, and HLB Panagene also fell across the board.
An HLB Group official said, "With affiliate stock prices plunging together, Chair Jin bought treasury shares to demonstrate confidence in corporate value."
CEO Choi Ho-il of Peptron(087010) and CEO Lee Sung-uk of Rznomics(476830) also bought company shares on the 13th of last month. Choi bought 10,000 shares of Peptron at 105,950 won per share, raising his equity from 7.15% to 7.19%. It is seen as an effort to correct market misconceptions that Peptron's joint research with Eli Lilly and Company is wavering.
A Peptron official said, "The shares were purchased to ensure the corporation's value is properly recognized."
Lee also bought 1,000 shares of Rznomics (at 32,250 to 32,350 won per share), raising equity from 16% to 16.01%.
◇ Market reaction mixed despite buybacks
Executive share buybacks are usually interpreted as a symbolic show of confidence in corporate value. Markets often respond positively and push prices higher, but this time the reaction is mixed. Kolon TissueGene, HLB Genex, HLB Panagene, and Rznomics saw share prices fall through the 3rd of this month after executives said last month they would buy treasury shares. HLB, HLB Therapeutics, and Peptron announced buybacks and saw prices rise over the same period.
Experts cite jittery market sentiment as the reason for sluggish share prices. With core businesses shaken by clinical trial and FDA approval failures, buybacks alone are unlikely to quickly revive investor sentiment. Prolonged high interest rates amid Middle East tensions are also weighing on the market.
Some also advise caution, noting that new drug development is a high-risk, high-reward business. Investors buy shares hoping for success, but the odds of winning approval after overcoming clinical trial hurdles are only about 10%. If a product makes it to market, the payoff can be huge, but failure can saddle companies with heavy losses.
Kim Seon-a, a researcher at Hana Securities, said, "The recent biotech decline appears to stem from marketwide fear," adding, "We need the rationality to read the fundamentals."