Finally on the Judgment Stand: SillaJen and the Approaching Fate Day of Kolon TissueGene... Will the Tears of 230,000 Ants Ever Dry?

'227,121 Small Shareholders' Fate Hinges on Korea Exchange Decision
Market Evaluation "Cautious... Emphasis on Possibility of ShillaJen Trading Resumption"

[Asia Economy Reporter Lee Seon-ae] Domestic bio companies ShillaJen and Kolon TissueGene, facing the risk of delisting, are finally having their fates decided. ShillaJen's fate will be determined on the 12th, and Kolon TissueGene will face judgment on the 25th. With a total of 227,121 small shareholders?165,483 for ShillaJen (as of June this year) and 61,638 for Kolon TissueGene (as of the end of last year)?the decision by the Korea Exchange is drawing intense attention.

ShillaJen Likely to Resume Trading After 2 Years and 5 Months

According to the Korea Exchange on the 11th, the KOSDAQ Market Committee will decide on ShillaJen's delisting status the following day.

ShillaJen's former CEO Moon Eun-sang and other former executives were arrested and indicted on charges of embezzlement and breach of trust, leading to a cause for a substantial review of listing eligibility in May 2020, which resulted in the suspension of stock trading. The Korea Exchange's Corporate Evaluation Committee (CEC) granted a one-year improvement period in November 2020, but after this period ended in January this year, it decided on delisting. Subsequently, in February, the KOSDAQ Market Committee granted an additional six-month improvement period, which ended on August 18.

The Exchange required ShillaJen to ▲hire clinical officers responsible for research and development (R&D) ▲establish transparent management and a technology committee in non-R&D areas ▲secure business continuity by expanding the new drug pipeline. In response, ShillaJen submitted an implementation report and expert verification documents on the improvement plan to the Exchange on the 8th of last month. Last month, ShillaJen announced that it had introduced 'BAL0891,' a mitotic checkpoint inhibitor (MCI) candidate drug, from Swiss pharmaceutical company Basilea, thereby moving away from a single pipeline structure.

The Market Committee can make one of four possible decisions regarding ShillaJen: ▲maintain listing ▲delist ▲postpone deliberation (defer judgment) ▲grant an improvement period of up to six months. If delisting is decided, ShillaJen can file an objection and request a re-examination by the Market Committee. If listing is maintained, stock trading will resume the next day, marking the first trading since May 2020, approximately 2 years and 5 months ago.

ShillaJen is hopeful for trading resumption. To this end, New ShillaJen Investment Association, the second-largest shareholder and financial investor (FI), extended the 40 billion KRW stock lock-up period, which was due to expire last month, until next year to alleviate concerns about overhang (potential selling pressure) after trading resumes. Small shareholders hold 66.1% of the issued shares, totaling 165,483 individuals. The association plans to distribute shares in kind to its members several times from the time trading resumes until next year.

The market is cautiously watching the possibility of trading resumption. The key point is how much the efficacy of the new candidate drug can be verified in the implementation report. A market official said, "If ShillaJen has fulfilled all the requirements set by the Exchange, trading resumption is expected. However, there may be differences in standards regarding fulfillment, so caution is warranted, and postponement is also possible."

Uncertain Outlook for Kolon TissueGene

The Corporate Evaluation Committee (CEC) that will decide Kolon TissueGene's delisting status is scheduled to meet on the 25th. Kolon TissueGene's trading was suspended due to controversy over the composition of Invossa-K, which was undergoing Phase 3 clinical trials in the U.S. in 2019. The main component of Invossa was revealed to be kidney cells rather than cartilage cells, leading the Ministry of Food and Drug Safety to revoke its product approval, and Kolon TissueGene was designated for a substantial review of listing eligibility.

The CEC decided on delisting Kolon TissueGene in August 2019, and the Market Committee granted a one-year improvement period in October of the same year. In October 2020, the Market Committee again decided on delisting, but after the company's objection, it granted another one-year improvement period. The Market Committee met again in February this year but decided to postpone the deliberation.

Separately, in July 2020, an embezzlement case involving 2.7 billion KRW by a former executive occurred, adding another cause for a substantial review of listing eligibility. The designation for listing eligibility review due to embezzlement and breach of trust charges was made in July 2021. The CEC then granted a one-year improvement period, which ended on August 31. Kolon TissueGene submitted its improvement plan implementation report on September 23, and the Market Committee will review the materials and decide on delisting by the 25th.

The Market Committee can make one of three possible decisions for Kolon TissueGene: ▲maintain listing ▲delist ▲postpone deliberation. Since it has already been granted a one-year improvement period, additional improvement periods are not possible.

Kolon TissueGene is not giving up hope for trading resumption. It raised 74.3 billion KRW through third-party allotment capital increases in December last year and August this year, and recently issued convertible bonds (CB) worth 33 billion KRW, striving to improve its financial structure. Additionally, the company resumed patient dosing in the U.S. Phase 3 clinical trial of Invossa in December last year. The fact that the U.S. Food and Drug Administration (FDA), known for its stringent drug review standards, allowed the clinical trial to resume raises expectations that some doubts regarding safety and efficacy have been alleviated.

However, the market views Kolon TissueGene's outlook with greater caution. Due to the nature of new drugs, technical aspects make it practically impossible to predict outcomes, and it is still uncertain whether FDA approval will be granted.

This content was produced with the assistance of AI translation services.