[Reporter’s Notebook]Will Penny Stock Rules Also Delist Bio Innovation?

The financial authorities' knife, drawn in the name of improving the structure of the stock market, is now pointing at the bio industry. The delisting of penny stocks and the tightening of market capitalization criteria are already sufficiently threatening, and with drug price cut policies overlapping, a growth industry is effectively being treated as a target for restructuring. The goal of clearing out insolvent companies is reasonable. The problem is that the yardstick is far too simplistic.

The facts are stark. As of the closing price on February 20, there were 34 listed pharmaceutical and bio companies on the KOSPI and KOSDAQ whose shares trade as penny stocks or whose market capitalization is less than 20 billion won. Among them, 14 are bio companies whose main business is research and development. When the new regulations take effect in July 2026, these firms will be immediately exposed to delisting risk. If, in January 2027, the market cap threshold on KOSDAQ is raised to 30 billion won, an additional 22 companies will come under pressure. In substance, 56 companies fall within the effective scope of the regulations. For example, Excel Therapeutics, which was listed in July 2024, will find itself categorized as at risk of delisting without having been given sufficient time to prove its performance.

The logic of the financial authorities is not wrong. Penny stocks are highly volatile and can easily be abused for unfair trading. The Nasdaq in the United States also has delisting requirements for stocks trading below 1 dollar. It is also difficult to dismiss the self-critical remark that "being shunned by the market is something the industry itself must reflect on." When insolvent companies remain on the market for a long time, losses to individual investors accumulate. One cannot deny the overall direction of accelerating delistings to restore market confidence.

However, bio is an industry that requires a different yardstick. New drug development alone can cost tens of billions of won at the clinical stage, and it can take more than 10 years before any revenue is generated. As of 2022, 101 out of 171 companies listed under the technology exception scheme were bio companies. These firms, which entered the market on the strength of their technological potential, are already subject to the regulation on loss from continuing operations before income tax (LCOBIT), under which repeated large-scale losses can lead to delisting. On top of this, if penny stock regulations are added and drug price cut policies are implemented that sharply lower the ceiling price of generic drugs whose patents have expired, the financial capacity of pharmaceutical companies, which are the main customers of bio firms, will also shrink. This creates a double burden: funding channels are blocked, and the wallets of their client companies become thinner.

In the end, the policy will not only cut out insolvent companies. Firms whose share prices have collapsed just before Phase 3 clinical trials, and companies that have strong technology but no revenue yet, are all lumped into the same category. Regulations intended to weed out insolvency end up burning the very seeds of growth. While Nasdaq is often cited as a reference model, Nasdaq grants up to 360 days of a cure period after a penny stock designation. That is 270 days longer than Korea's 90 days. This is why the warning that "if the sole emphasis is on the speed of delistings, the entire bio ecosystem could be stifled" should not be taken lightly. At this juncture, precision matters more than speed, and a multidimensional perspective on growth industries is more important than ever.