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| Gettyimagesbank |
By Anna J. Park
Market interests and profitability of biopharma companies have exponentially grown over the course of the ongoing global pandemic.
This year alone, 21 newly listed firms out of 65 IPO cases are biopharmaceutical companies, drawing in a large amount of money for stock allotment from the IPO process. Some of the most successful IPO bio companies this year include SK Biopharmaceuticals, SCM Lifescience, Korea Pharma, Dream CIS, Gencurix, Kobiolabs and more.
More bio companies are set to launch IPOs in December as well, such as Genome & Company and Prestige Biopharma.
Despite the ever-increasing number of bio-related companies in the country and their rosy growth potential in the near future, securities firms are having difficulties in dealing with the IPO process of these businesses due to lack of expertise in the bio sector.
Only qualified employees with an academic background in life sciences and pharmaceuticals to at least a master's or doctorate degree level could understand bio-related companies' detailed business plans based on different stages of clinic trials and new drug pipelines. That's why those with bio and medical knowledge at securities firms are hired mostly as bio industry analysts.
However, when it comes to the IPOs of new bio firms, industry sources say securities firms are experiencing a dilemma as to whether to take an underwriter's role in their initial public offering process.
It is a market that they should not neglect, yet due to lack of finance-educated staff with bio expertise, their burden grows heavier. In other words, as only a few qualified employees understand bio companies' business plans and the accuracy of their outlooks, IPO-specialized staff, who mostly have academic backgrounds in finance and management, are having difficulties in evaluating exact values of bio firms and coming up with appropriate initial offering prices. Bio firms wish to raise the offering prices, but securities firms' IPO experts are having difficulty in setting a solid price that accurately reflects the potential of the sector.
For the past three to four years, securities firms have put significant effort into securing IPO deals with fledging bio companies. The vigorous moves around the sector's public offerings have also been buttressed by the state-run bourse exchange's special listing track that is open to companies with technical growth potential. If only guaranteed by IPO underwriter companies, new bio companies could raise public money through the listing. From 2005 to 2019, 87 companies have been listed at KOSDAQ through the special listing track, and 67 of those businesses are bio companies.
As they cannot give up on the newly-growing field, it is now a must for underwriters to run their own bio team in order to have a chance to win contracts for bio firms' IPOs. Large securities firms are running bio-focused teams, yet smaller companies are not experienced enough or don't have enough staff to excel in the sector's IPO process.
Thus smaller securities firms are faced with increasing costs to back up these teams in order to avoid being left behind, while the chances of them being selected by bio companies gets slimmer and slimmer due to their lack of a track record.
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