Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Will Helixmith follow SillaJen, Kolon TissueGene?
Helixmith CEO Kim Sun-young, right, speaks at a press conference held at the Press Center in central Seoul in September 2019. / Korea Times file
By Anna J. Park
Helixmith faces danger of possible delisting if it fails to raise new capital this winter
By Anna J. Park
Korean biopharmaceutical firm Helixmith's stock price has been on a steep decline for the past few months. The stock finished at 20,450 won ($18.04), dropping another 0.24 percent on Wednesday's trading session. The biopharmaceutical company's stock price went up slightly on the previous trading day, ending a losing streak of the past five consecutive sessions, yet it fell again on Thursday.
Since mid-September, the biopharma company's stock price had been on a continual downward move, after the company announced that it would raise capital by issuing 7.5 million new shares worth 267.6 billion won. Upon the announcement, the firm's stock plunged by some 40 percent for the next few weeks until last Friday.
That was because the Korean pharmaceutical company had already raised capital by issuing new shares worth about 146.9 billion won back in August last year. At that time, the firm told its shareholders that it would not raise any more capital for the next two years. Thus, September's announcement came as a signal that the company has been failing at managing itself.
Adding fuel to the fire, the biopharma company notified its investors last Friday that the company had invested about 264.3 billion won in high-risk, high-return financial alternative assets since 2016, and ended up losing some of the money. According to industry sources, the company failed to retrieve about 31.5 billion won invested in private equity funds operated by now-defunct Optimum Asset Management, as well as another 2.5 billion won invested in controversial DLS investment.
With the announcement at the end of last week, the firm's stock price fell by 30 percent ― hitting the 30 percent price change limit at the Korea Exchange ― on Monday, and then dropped another 9 percent in Tuesday's session.
“As most of the company's research and development costs have been funded by money raised through new capital increase and convertible bond issuance, the firm attempted to make additional profits by investing in high-risk, high-return alternative assets, including derivative products and real estate,” the firm wrote in its official statement posted on its website earlier this week, trying to assuage angry and disappointed investors.
The firm acknowledged that some of the investments were made to the unsound and problematic private equity funds operated by Optimum Asset Management, vowing that it would not repeat such a mistake.
“The company feels immense responsibility for the wrong decision of investing into those high-risk products,” the statement continued, adding that it would try to retrieve some of the losses incurred.
The company is struggling to secure enough funding for R&D of its phase 3-2 trial for a gene therapy called Engensis, or VM202-DPN ― a potential treatment for diabetic peripheral neuropathy. But the clinical trials haven't much yielded any tangible results, and will possibly take much longer for completion.
Without having a clear signal of the treatment development's imminent success, the market cap of the biopharmaceutical company led by CEO Kim Sun-young, a former Seoul National University professor and scholar, has been reduced to some 524.6 billion won, which is only about 10 percent of its past market cap of 4.98 trillion won logged in March last year.
If the company, currently suffering from falling stock prices and investment failures, fails to attract new capital in the winter, it is highly likely to be put on a special watch list of the bourse operator Korea Exchange (KRX).
This downward path in front of Helixmith recalls the disgraceful fall of SillaJen and Kolon TissueGene, both which once earned high expectations from investors, but ended up waiting for the KRX's judgment on whether they should be delisted.
Amid such anticipated hardships, criticisms rise among retail investors and shareholders of the firm that only global investment banks or foreign institutional investors earn massive fortunes by short-selling these local biopharmaceutical companies. Helixmith, for instance, had argued and refuted a few times for the past few years regarding Goldman Sachs' continual sell reports that sharply lowered the firm's target price.
“It involves a significant amount of danger, investing in the biopharmaceutical sector, as it is almost impossible to figure out whether the clinical trials will succeed or not,” a market insider stressed, urging utmost caution among retail investors.
“Asset management companies and venture capital firms also rely on a small number of in-house pharmaceutical experts, and even they are not completely aware of bio firms' exact capabilities and potentials.”