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A String of Bad Events Raises Questions about Growth Potential of Korean Bio Industry
Bubble Bursting Or Growing Pains?
A String of Bad Events Raises Questions about Growth Potential of Korean Bio Industry
  • By Choi Mun-hee
  • July 24, 2018, 10:25
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The South Korean bio industry has hit a string of unfavorable factors.
The South Korean bio industry has recently been hit by a string of unfavorable factors that raised questions about its growth potential.

A string of bad events in the South Korean bio industry are fueling concerns that a “K-biotech stock bubble” might burst.

According to industry sources on July 23, SillaJen Inc., one of South Korea's top biotherapeutics companies, has encountered criticism from its shareholders as executive officers have left the company one after another. SillaJen posted an announcement on its website assuring shareholders of its fundamental management ability but it is getting an icy stare from the market.

The prolonged controversy over Samsung BioLogics Co.'s accounting fraud allegations is also becoming a drag on K-biotech stock growth. Financial authorities have deliberated on Samsung BioLogics’ accounting fraud allegations for nearly two months but have yet to reach a final judgment on the key issue of whether the company intentionally committed accounting fraud. Accordingly, the situation is highly likely to be prolonged.

A series of cancelled technology export contracts also casts a cloud on South Korean biotech companies’ growth prospects. In November last year, US-based pharmaceutical firm Tobira Therapeutics canceled a US$61.5 million (about 70 billion won) license deal for a non-alcoholic hepatitis treatment candidate with Dong-A ST Co.

In addition, Hanmi Pharmaceutical Co. decided to cease the development of Olita, a lung cancer treatment, in April after an exclusive sales licensing deal with BoehringerIngelheim Pharmaceuticals Inc. was canceled in September 2016.

Recently, there is a growing controversy over the morality of bio company top management. Following SillaJen, Nature Cell Co. has taken a beating after CEO Ra Jeong-chan was arrested on charges of stock price manipulation on the 18th. Accordingly, distrust of the bio industry as a whole, which was caused by the late announcement incident of Hanmi Pharmaceutical in 2016, was rekindled.

However, some watchers of the biotech industry say that the recent series of unfavorable factors is a kind of growing pains. They say a process of “picking out precious stones” is going on and companies with competitive edge will survive and bring about good results after all. Illegal activities committed by some companies will also serve as a momentum to strengthen the industry’s self-cleaning ability in the end.