Repeated Insincere Disclosures... Large Pharmaceutical and Bio Companies Want to Cry

Celltrion Pharm Fined for 'Incorrect Disclosure Response'
Hanmi, Green Cross, SK Bioscience Also Penalized
System Changes Cause Confusion... Corporate Reimbursement Issues Arise

Korea Exchange, Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

Large domestic pharmaceutical and biotech companies are increasingly being designated as 'non-compliant disclosure corporations.' While this label was previously a stigma associated with small biotechs inexperienced in disclosure tasks, this year, large pharmaceutical and biotech companies with market capitalizations in the trillions of won are also frequently being designated.

Celltrion Pharm was designated as a non-compliant disclosure corporation on the 27th of last month due to 'incorrect disclosure of inquiry response and omission of important matters.' The reason was that during the Celltrion Group merger process, Celltrion Pharm was not completely excluded but was disclosed in a way that could be read as if it was excluded from the target. The Celltrion Group announced a merger blueprint to first merge Celltrion and Celltrion Healthcare, followed by a second merger between the integrated Celltrion and Celltrion Pharm. However, Celltrion Pharm disclosed that "it was not included in the merger target among the business companies," and the Korea Exchange judged that Celltrion Pharm made an incorrect disclosure. As a penalty, 4.5 penalty points were imposed, but in practice, the penalty points were replaced by a fine of 18 million won.

Non-compliant disclosure refers to cases where a listed company fails to faithfully fulfill its disclosure obligations, committing violations such as non-disclosure, reversal of disclosure, or changes in disclosure. If the accumulated penalty points from designation as a non-compliant disclosure corporation reach 10 points for KOSPI or 8 points for KOSDAQ, trading is suspended for one day. If penalty points exceed 15, it becomes grounds for a substantive review of listing eligibility. Since disclosure is a listed company's duty to properly inform correct information about the company, repeated failure to do so results in severe penalties.

Recently, in addition to Celltrion Pharm, large pharmaceutical and biotech companies such as Hanmi Pharm, Hanmi Science, SK Bioscience, and GC Green Cross have been consecutively designated as non-compliant disclosure corporations, raising questions about market fairness.

Hanmi Science and Hanmi Pharm of the Hanmi Pharm Group were designated as non-compliant disclosure corporations in August due to delayed disclosure of clinical trial plan (IND) approval applications. Hanmi Pharm was fined 16 million won, and Hanmi Science was fined 8 million won for disclosure violations. Earlier, in July, Hanmi Pharm announced to the media that it had submitted a clinical phase 3 IND for obesity treatment indication of 'Epeglenatide (development code HM11260C),' a glucagon-like peptide (GLP)-1 analog, to the Ministry of Food and Drug Safety. However, this violated the KOSPI bio disclosure guidelines of the Korea Exchange. Phase 3 clinical trials require disclosure of IND application and results, clinical results, or suspension/termination facts. Hanmi Pharm made the disclosure the next day, but the Exchange regarded it as delayed disclosure.

SK Bioscience and GC Green Cross were designated as non-compliant disclosure corporations due to delayed disclosure of influenza vaccine sales and supply contracts. SK Bioscience disclosed the contract signing on June 8 only on the 14th, and Green Cross disclosed the 2022-2023 flu vaccine supply contract signed last year after one year. Both companies were fined 8 million won each.

Hard to see as 'intentional' delayed disclosure

However, there are also opinions that these cases differ from previous ones because the companies were not trying to hide unfavorable facts but rather were disclosing positive news that benefits the company, and the information had already been sufficiently announced through the company or government via the media. Recently, Kwangdong Pharmaceutical was designated as a non-compliant disclosure corporation for delayed disclosure of a business suspension and received 5 penalty points and a fine of 50 million won, but unlike that case, industry insiders evaluate these incidents as temporary mistakes caused by failure to properly understand the changed systems during the COVID-19 period.

The KOSPI bio disclosure guidelines, which were the basis for sanctions against Hanmi Pharm and Hanmi Science, were created in 2020. The Korea Exchange made the guidelines after repeated criticisms that pharmaceutical and biotech companies arbitrarily interpreted clinical trials for promotional purposes. Since Hanmi Pharm last entered a large phase 3 clinical trial in 2019, it is possible they did not fully grasp these facts. An industry insider said, "Disclosing even IND applications, not just approvals, is a burden for companies," expressing concerns that strategies could be exposed before product development is on track.

Inspection and packaging of the influenza vaccine 'Skycellflu' are underway at SK Bioscience L House in Andong-si, Gyeongbuk.
[Photo by SK Bioscience]

SK Bioscience and GC Green Cross also cite system changes as the main cause. Until before COVID-19, national influenza vaccine bids were conducted by individual wholesalers, but the bidding method changed to direct bidding by manufacturers, so the related sales began to be recorded as the manufacturers' sales in bulk. Previously, this was not a disclosure matter, but now if sales exceed the threshold, disclosure is mandatory. The Korea Exchange detected Green Cross's delayed disclosure only after one year.

Also, in Hanmi Pharm's case, the company proactively issued a press release first, and regarding the flu vaccine, the Korea Disease Control and Prevention Agency released a press statement announcing the completion of this year's procurement contract, including that SK Bioscience supplied 2.42 million doses at 10,650 won each, making it difficult to see these as intentional concealments.

Therefore, voices are emerging that the recent wave of non-compliant disclosure controversies involving large pharmaceutical and biotech companies should be viewed differently from previous cases. An industry insider said, "Most recent controversies arose from sudden system changes or during the process of revealing companies' future plans. While previous controversies often involved attempts to hide corporate risks, these recent incidents involved positive news that companies actively disclosed to the media, so they cannot be seen on the same level. Since these are temporary situations, the risk of recurrence is considered low."

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