[Trust in the Market Shaken by Samchundang] ②The Art of Promotion That Sways Investor Sentiment

Disclosures State 50 Billion Won, Press Releases Claim 5 Trillion Won

Exaggerated Publicity Relies on Information Asymmetry

Difficult to Grasp Objective Facts

Editor's Note
Behind the volatility in Samchundang Pharm's stock price lies a web of chronic and structural issues, including the excessive ambition of KOSDAQ-listed technology companies and loopholes in the market system. The recent incident, which wiped out tens of trillions of won in market capitalization in an instant and sent investors into a panic, is particularly painful as it has seriously damaged the trust assets that the K-bio industry has painstakingly built. This article examines whether the technological blueprints Samchundang Pharm presented to investors are truly realistic, and what institutional deficiencies contributed to this situation.

[Market Trust Shaken by Samchundang]①Empty Technological Blueprints

[Market Trust Shaken by Samchundang]②The Art of Promotion that Captivates Investor Sentiment

[Market Trust Shaken by Samchundang]③Regulatory Loopholes, Persistent Risks

Beyond the validity or consistency of the technology itself, another issue that emerged from the controversy surrounding Samchundang Pharm is the mechanism of disclosure and promotion. Under the Capital Markets Act, disclosure systems are supposed to specify contract terms and potential risks to protect investors. However, because the specific content to be included is not clearly defined, companies have room to interpret disclosures arbitrarily or to conceal negative information.

The Pitfall of 'Confirmed Receipts of 50.8 Billion Won, Expectations of 5.3 Trillion Won'

According to the bio industry and financial investment market as of April 14, one of the main sources of "misunderstanding" in the market regarding Samchundang Pharm concerns how the "scale" of overseas technology transfer and supply contracts is calculated. Typical bio technology deals consist of a non-refundable upfront payment, conditional milestone payments received upon reaching certain stages, and royalties generated after product launches. In the case of the exclusive sales contract for 11 European countries announced by Samchundang Pharm last February, the official disclosure specified a confirmed maximum receipt of 50.8 billion won. However, a press release issued the same day prominently featured the figure of "5.3 trillion won." This figure is a projected value, simply back-calculated from the expected net profit over 10 years based on optimistic scenarios, such as product approval and achievement of market share targets. There is a clear difference between this expectation and confirmed cash flow.

During the exclusive U.S. sales agreement, a "binding sales forecast of 15 trillion won over 10 years" was highlighted in press releases, further boosting market expectations. However, uncertainties remain, such as whether the product will receive FDA approval and whether competing drugs might emerge in the future, which could change the conditions required to maintain the contract. The profit-sharing ratio, which was made public as an unusual 9-to-1 split, also fueled debate over the feasibility of these expectations. The tendency for capital to gravitate toward large, intuitive headline numbers instead of the more complex detailed disclosures is seen as a factor driving sharp fluctuations in stock prices.

A biotech CEO who requested anonymity commented, "Amid rising expectations for 'profitable bio' and a changing perspective on the industry, following consecutive technology transfer deals between major domestic biotechs like Alteogen, ABL Bio, and Legochem Biosciences and big pharma, this controversy erupted. While I understand the motivation to communicate a company's intrinsic value, there needs to be deeper reflection and self-regulation on these methods; for the sake of market order, a stricter institutional framework should be implemented."

Disclosure Obligations Exist, but Data Quality Standards and Interpretation Remain Ambiguous

The recurring nature of this phenomenon stems from the ambiguity in the current disclosure guidelines regarding quality control standards. While there are obligations to disclose actions such as clinical data or regulatory approval results, there is a lack of detailed standards specifying the required data quality or the permissible scope of company interpretation. Similar controversies have arisen in the past with companies like Aptabio and HLB.

On July 29, 2022, Aptabio disclosed the Phase 2 clinical trial results for its diabetic nephropathy treatment, APX-115, and distributed a press release titled "Phase 2 Success, Bright Outlook for Technology Export." The official disclosure stated that while efficacy was demonstrated among "severe patients" and those in the "treatment-adherent group," it also clearly indicated that "statistical significance was not achieved among all clinical trial participants." However, this latter point was omitted from the press release, which only highlighted the efficacy in certain groups while claiming overall clinical success. The stock price surged 53% in two days, then plummeted more than 30% from its peak when questions about data reliability arose, resulting in significant losses for many investors during that period.

In September 2019, HLB became embroiled in allegations of false disclosure during its announcement of global Phase 3 clinical trial results for the anticancer drug rivoceranib. In May 2020, the Financial Supervisory Service launched an investigation for Capital Markets Act violations, judging that HLB had described the trial as a "success" in external promotional materials despite failing to meet the primary endpoint of overall survival (OS). Following the false disclosure allegations, HLB Group's market capitalization shrank by about 1.5 trillion won in just one week. However, after one year and ten months, HLB was ultimately cleared of all charges by prosecutors.

On April 8, Heo Hyemin, Team Leader at Kiwoom Securities Research Center, pointed out via Telegram, "Recently, investors are increasingly struggling to distinguish which companies are genuine biotechs and which are driven solely by expectations. As a result, risk aversion toward the biotech sector is inevitably growing." She further analyzed, "K-bio recorded a historic high in technology transfer achievements last year, forming a 'justified' bubble, but at the same time, there are stocks where optimism is driving up prices before sufficient clinical or performance validation. Some of these stocks display the characteristics of so-called 'meme stocks,' where narratives and capital flows dominate prices rather than intrinsic value."

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