Bio Industry Becomes Frothy With Rosy Outlooks Only

These days, the bio industry is full of rosy announcements. 

New bio medicines are a matter of huge interest as one single bio medicine can create trillions of won in added value. Taking into account the fact that very few drugs become commercially successful after a long and difficult clinical process, it is concerned that some pharmaceutical companies can cause distrust of the overall bio industry by distorting investment information.

According to the bio drug industry on September 26, clinical information is being disclosed by Korea's Ministry of Food and Drug Safety and the Korea National Institute of Health among others at the public health organization level. The Ministry of Food and Drug Safety made such information public when a clinical plan for a pharmaceutical product is approved in each phase (phases 1, 2 and 3).   

Here, a pharmaceutical product whose clinical plan is approved is basically a product, a clinical test of which is smoothly conducted. For example, if a pharmaceutical product receives the approval of the second phase test, this means that the product successfully passed the first phase test. 

But if the results of a clinical test are not satisfactory, the organization does not announce them. This public disclosure method of the Ministry of Food and Drug Safety becomes one of the reasons why only information on the successful results of clinical tests is distributed. Announcements of such results are not an obligatory public disclosure item of a listed firm.

There is a criticism that it is unclear whether or not the results of a clinical test failure are properly reported to the Ministry of Food and Drug Safety. “The results of a stage of a clinical test should be reported in a completion report. But there is a tendency for companies to be reluctant about doing so for fear of a drop in their stock prices,” said a representative of a pharmaceutical company. The penalty for not submitting a completion report is no more than the suspension of the clinical test and is almost bereft of its effectiveness. This is because in the case of the failure of one phase, the company does not have any reason for continuing the test. 

The Korea National Institute of Health is having pharmaceutical companies register clinical test information in the Clinical Research information Service (CRIS). But the registration rate is low as clinical test information is recommended to register in the service apart from that of clinical research supported by the Ministry of Health and Welfare.  In fact, items registered in the CRIS totaled 361 in 2014. The figure is much less than 930 Korean items registered in the US clinical test registration system.       

Furthermore, as information disclosed in the CRIS is mostly clinical test purposes and plans, it is a big challenge to figure out the results of clinical tests. By contrast, if companies receive the approval of their clinical tests or the results are positive, they become bent on driving up their stock prices or inducing investment money through academic societies and IR events among others.    

Experts say that a sizable improvement should be made to the clinical test information disclosure system to prevent negative side effects such as the distortion of stock prices, build a sound ecosystem for bio company foundation and tell good companies from bad ones.     

“Unless clinical test results are properly disclosed, it deceives the market,” stressed Lee Seung-kyu, a senior managing director at the Korea Biotechnology Industry Organization.

“We will consider making measures to make it legally compulsory to disclose clinical test information like the US and the EU and open the results of a failed clinical test on time,” said a representative of the Korea National Institute of Health.