[Asia Economy Reporter Lee Seon-ae] Taking advantage of the increased interest in the bio industry due to COVID-19, bio companies are increasingly entering the initial public offering (IPO) market, but it seems not easy to clear the listing hurdle due to the stringent screening by financial authorities.
According to the Korea Exchange on the 6th, it was confirmed that Korea Drug Research Institute submitted a preliminary listing examination application on the 3rd to enter the KOSDAQ market by the end of the year. Korea Drug Research Institute is a clinical trial contract research organization (CRO) established in 2010 that provides services covering all areas related to clinical trials for new drug development of pharmaceutical companies. Korea Drug Research Institute plans to complete its listing within this year and pursue a growth strategy by entering not only the domestic CRO market but also the overseas CRO market starting next year. Earlier, it was confirmed that Noeul, an artificial intelligence (AI) blood diagnostic platform company, submitted a preliminary listing examination application to the KOSDAQ Market Division of the Korea Exchange on the 26th of last month.
Although the bio industry’s IPO initiatives continue one after another, there are also many cases of withdrawal from listing. Excel Therapeutics, a cell culture medium (nutrient for culturing microorganisms, etc.) company, and Novomics, a cancer molecular diagnostics company, withdrew their preliminary listing examinations at the end of last month. In July, Engenomics, a white matter enzyme producer, and Lemon Healthcare, a healthcare data two-way platform company, also withdrew their preliminary listing examinations. As the number of bio industry listing applications increases, the financial authorities’ screening, which has high concerns, has become more stringent. A person in charge of listing underwriting said, "Since the submission of preliminary listing applications, the Korea Exchange’s screening period has become longer than usual, leading to an increase in voluntary withdrawals."
There have also been cases of receiving notifications of non-approval of screening or requests for amendments to securities registration statements. Earlier this year, Osang Healthcare, a COVID-19 diagnostic kit company, was notified of non-approval of listing screening by the Korea Exchange. Although its performance has recently increased significantly due to COVID-19, the industry believes that unclear business plans after COVID-19 have been a stumbling block. Cha Vaccine Institute was requested by the Financial Supervisory Service to amend its securities registration statement to strengthen investor protection-related content.
A bio industry official said, "It is true that the bio industry has attracted attention due to the COVID-19 pandemic and has jumped on the IPO fever," adding, "However, after the rapid growth from the COVID-19 windfall, companies are failing to present growth potential, facing 'profitability bubble controversies' and 'financial stability risks,' which prevent them from clearing the listing hurdle."
Meanwhile, this year’s IPO market is setting record highs. According to the Korea Exchange, as of the 3rd of this month, the total IPO public offering amount of companies newly listed on the KOSPI and KOSDAQ markets this year reached 16 trillion won (73 companies). This is 2.7 times the 5.94 trillion won public offering amount of 95 companies listed last year. It is 1.6 times the scale of 10.15 trillion won in 2010, which was the largest ever. It is also the first time in 11 years since 2010 that the annual public offering amount has exceeded 10 trillion won. Na Seung-doo, a researcher at SK Securities, said, "Since there are still companies with high market interest scheduled for new listings, the total annual public offering amount is expected to be around 25 trillion to 30 trillion won," adding, "Especially in the KOSDAQ market, interest in IT and bio companies is high, and with the emergence of companies in new growth industries such as secondary batteries and virtual reality, the number of new listings of IT and bio companies, which was concentrated in 2017 (public offering amount of 3.5 trillion won), is expected to be exceeded."
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