Helixmith, a Korean biotech firm focusing on gene therapy, is facing potential administrative measures from the Korea Exchange, having repeatedly delayed its capital increase payment deadlines over a span of six months.

According to the Financial Supervisory Service's electronic disclosure system, the Kosdaq market headquarters notified Helixmith of its possible designation as a business corporation unfaithful in public disclosure following Kosdaq market disclosure regulations.

If Helixmith is finally designated as a business corporation unfaithful in public disclosure, it may be suspended from trading for one day if the company receives a penalty point of eight points or more.

If the company accumulates more than 15 penalty points within a year, the company may be subjected to a substantive review for its listing qualifications per Kosdaq regulations.

The measure comes after Helixmith in February decided to raise operational funds through a third-party allotted paid-in capital increase worth 10 billion won ($7.4 million) to CanariaBio, the subsidiary of CanariaBio M, which acquired Helixmith in December of last year.

At that time, the price per new share was set at 16,830 won for a total of 936,066 shares. However, Helixmith has since postponed the payment deadline for CanariaBio five times, extending it from April 11 to April 25, 2024.

This is likely due to a significant decline in Helixmith's share price since the announcement of the third-party allotted paid-in capital.

The company had initially tried to justify the first payment postponement as Helixmith's shares had dropped to 8,770 won, which was 18 percent lower than the new share issue price, after the market reacted negatively to CanariaBio M's acquisition of Helixmith.

However, the company's shares have continued to plummet and closed the market at 4,135 won on Wednesday, further deteriorating the company's financial prospects.

Industry officials had previously speculated that Canaria might wait for the share price to recover before making its investment to minimize losses.

"However, the continuous drop in share price has made even this strategy unviable, leading to predictions of a potential default on payment," an industry official told Korea Biomedical Review, asking to remain anonymous due to the sensitivity of the issue. "Some speculate that CanariaBio might be postponing the capital increase payment to confirm the results of the phase 3-2 trial results of Helixmith's Engensis, also known as VM202-DPN, in treating diabetic peripheral neuropathy (DPN)."

Helixmith has been continuously delaying the announcement of the Engensis clinical trial results.

They postponed the interim results announcement several times and finally decided to proceed without an interim analysis, announcing they would release the final analysis in December.

"Given the alternating delays between the additional share purchase payment and the clinical trial results announcement, it seems like CanariaBio might be buying time to avoid the payment," the official said. "Ultimately, if the company doesn't receive the money that should come in through new stock issuance, the small shareholders are the ones who will suffer the most.

Adding to the concerns, Helixmith's cash and cash-equivalent assets decreased by 56.4 percent, falling from 464 billion won at the end of the previous year to 202 billion won in June of this year.

The company also saw a significant decrease in R&D personnel during that same period, with the number of staff in the research department decreasing by 57.7 percent, from 97 to 41, fueling doubts about the company's ability to carry on with its drug development projects.

Helixmith was unavailable for immediate comments regarding the situation.