Syntekabio Hits New Low... Is Share Buyback Ineffective?

Stock Price Drops 67% This Year... Cumulative Sales of 7.11 Million KRW in First Half
CEO Jeong Jong-seon Confident in Business Growth, Buys Company Shares

The downward trend in Syntekabio's stock price continues. It has hit its lowest price in five years since its listing at the end of 2019. This appears to be due to a series of performance results far below the initial projections presented at the time of listing.

According to the financial investment industry on the 24th, Syntekabio's stock price has fallen 67% since the beginning of this year. Considering that the KOSDAQ index fell 14% during the same period, the market-relative return is only -53 percentage points (P).

Founded in September 2009, Syntekabio is an artificial intelligence (AI) new drug platform company based on technology that processes three-dimensional protein structures and genomic big data. It is developing AI drug development solutions to overcome the inefficiencies of traditional new drug research and development, promoting new drug development through joint research or in-house development. By applying AI technology to drug development, the time required to develop new drugs?from discovering drug candidates to securing clinical data and reviewing development feasibility?can be shortened. It was listed on the KOSDAQ market in December 2019.

KB Securities, the lead underwriter at the time of listing, calculated Syntekabio's per-share valuation by applying an annual discount rate of 30% to the estimated net profit of 38.9 billion KRW for 2023. They applied an average price-earnings ratio (PER) of 24.4 times from comparable companies selected, including Ubicare and Chong Kun Dang, and proposed a public offering price range of 15,000 to 19,000 KRW per share. After conducting demand forecasting targeting institutional investors, the public offering price was finalized at 12,000 KRW.

According to the prospectus at the time of listing, Syntekabio expected to turn profitable in 2022 and achieve sales of 65.9 billion KRW and operating profit of 48.3 billion KRW in 2023. It anticipated revenue generation through its own drug pipelines and pipelines jointly developed with partners.

In March 2019, Syntekabio licensed an immuno-oncology drug candidate jointly discovered with CJ Healthcare. It secured its own pipeline and expected to complete preclinical trials around 2022. It anticipated that upon subsequent technology transfer, upfront payments of approximately 36 million USD would be generated.

However, five years after listing, Syntekabio's sales remain at about 1% of the expected level. Last year, it recorded sales of 12.341 million KRW and an operating loss of 12.26668 billion KRW. In the first half of this year, cumulative sales were 7.11 million KRW with an operating loss of 6.8 billion KRW.

Syntekabio entered the KOSDAQ market through a growth-special listing among the KOSDAQ listing requirements. The special listing system was established in 2017. For companies recognized and recommended by the lead underwriter as having growth potential, it is possible to request a preliminary listing review without an evaluation grade from a professional evaluation agency. For six months after listing, the lead underwriter grants repurchase rights to general subscribers, strengthening the responsibility of the lead underwriter. Typically, companies applying for preliminary listing review under the technology growth special listing do not show stable financial structures or profitability because their business performance has not yet fully materialized.

Companies applying the technology growth special listing are granted certain exceptions when determining whether to designate management items. The sales requirement of less than 3 billion KRW does not apply for five consecutive business years including the year of new listing. Judging by the first half results, it is unlikely that total sales this year will exceed 3 billion KRW.

A financial investment industry official explained, "There seems to be a significant difference from the blueprint presented at the time of listing," adding, "Increasing sales volume is urgent."

As the stock price continues to fall, CEO Jeong Jong-seon of Syntekabio is purchasing company shares. CEO Jeong said, "This is being done as part of responsible management," and added, "We will share the fruits with shareholders through successful commercialization and continuous growth."