Domestic pharmaceutical and biotech corporations have been designated as under surveillance by the Korea Exchange (KRX). If they fail to escape "penny stock" status with share prices under 1,000 won, they could be delisted. To avert the crisis, corporations are searching for ways to boost their share prices and have begun efforts to reassure retail investors.
◇ Concern over penny stock delisting leads to reverse stock splits
On the 18th, the Korea Exchange (KRX) said pharmaceutical and biotech corporations, including CMG Pharmaceutical(058820), Lab Genomics(084650), Noul(376930), Shaperon(378800) and ABION, were among 36 listed companies recently designated as under surveillance. These corporations recorded share prices below 1,000 won for 30 straight trading days. Under Korea Exchange (KRX) rules, if a stock remains under 1,000 won for 45 consecutive days out of 90 trading days while under surveillance, it may enter delisting procedures.
Corporations are opting for reverse stock splits to avoid delisting. This merges multiple shares into one, reducing the number of shares outstanding and raising the per-share price. CMG Pharmaceutical will hold an extraordinary shareholders meeting on the 2nd of next month to vote on a reverse split plan. It would merge ten common shares with a par value of 500 won into one share worth 5,000 won. If approved, trading will be halted from Oct. 1 to Oct. 26, and the post-split shares will be relisted on the 27th.
Noul, Shaperon, ABION and Lab Genomics are pursuing reverse stock splits that combine five common shares with a par value of 500 won into one share worth 2,500 won. Noul passed the related agenda at its shareholders meeting on the 21st of last month, Shaperon on the 6th, and ABION on the 14th. Lab Genomics will also discuss the reverse split at its shareholders meeting on this day. If the agenda passes at Lab Genomics, these corporations will sequentially relist the combined shares from the 7th of next month to Oct. 8.
Some say reverse stock splits are not a fundamental solution. While a reverse split can raise the per-share price, it does not increase market capitalization. In the first quarter of this year, CMG Pharmaceutical (-2.9 billion won), Noul (-4.9 billion won), Lab Genomics (-4.2 billion won), Shaperon (-3.6 billion won) and ABION (-6.5 billion won) all posted operating losses. The view is that they ultimately need to deliver results through new drug development and overseas business to raise corporate value.
◇ Entering the U.S. and diversifying business… boosting corporate value
Corporations are also pulling out cards separate from reverse splits. CMG Pharmaceutical is preparing to enter the U.S. market with "Mezopi," a schizophrenia treatment. Mezopi is an orally disintegrating film formulation developed from existing tablet and injectable medications. Mezopi received U.S. Food and Drug Administration (FDA) product approval in April last year. A CMG Pharmaceutical official said, "We are coordinating production and distribution with relevant institutions for entry into the U.S."
Lab Genomics is also targeting the U.S. blood cancer diagnostics market. It plans to introduce in the United States blood cancer diagnostic technology from domestic corporation Dxome through Lab Genomics. According to the American Cancer Society, an estimated 190,000 patients undergo blood cancer diagnostics annually. A Lab Genomics official said, "Because blood cancer requires monitoring treatment response and tracking recurrence, multiple tests are necessary," adding, "We will improve profitability."
Noul is expanding overseas with products that diagnose cervical cancer and analyze blood using artificial intelligence (AI). For cervical cancer, AI reduces testing time from the previous one to two weeks to about 20 minutes, allowing patients in medically underserved areas to be tested more easily. Noul recently signed a contract to supply its cervical cancer and blood diagnostic products in Africa. A Noul official said, "Business in Europe is also growing," adding, "We plan to strengthen competitiveness so we can be removed from under-surveillance status."
Some corporations are pursuing business diversification. Shaperon, a new drug development corporation, acquired Nizetech last month. Nizetech is a corporation that owns the skincare brand Beaut. Shaperon has set a goal of combining biotech and beauty. A Shaperon official said, "Starting in the third quarter of this year, Nizetech's sales will be reflected in Shaperon's consolidation results, which can alleviate financial risk."