An increasing number of Korean healthcare firms have been designated unfaithful disclosure companies or are at risk of receiving a similar notice.
The Kosdaq Market Headquarters designates companies that fail to fulfill their disclosure obligations as mandated by related regulations as unfaithful disclosure companies. The violations include non-compliance with disclosure requirements, reversal of disclosures, and changes in disclosed information.
According to the Financial Supervisory Service's electronic disclosure system, pharmaceutical and biotech firms Caregen and PharmAbcine were designated unfaithful disclosure companies this year. Gene therapy provider Olipass and diagnostic device manufacturer PCL are also on notice for potential designation.
On Jan. 4, Caregen, a peptide research and development company, became the first firm to receive the designation this year due to changes in its disclosure by significantly altering a sales and supply contract.
The company entered a sales and supply contract in Japan in 2018 for cosmetics and medical devices, originally valued at 8.4 billion won ($6.2 million). However, the contract achieved only an 18 percent fulfillment rate, leading to a final confirmed amount of 1.5 billion won, significantly lower than the initial value.
The change in the disclosure has led to a penalty of two points.
PharmAbcine, an antibody therapy company, has received a designation as an unfaithful disclosure company and faces a review for its listing eligibility due to the reversal of its decision on a rights issue.
This decision has resulted in a trading suspension until the review is completed. The Kosdaq Market Headquarters was designated on Jan. 19, following PharmAbcine's reversal of its decision regarding a rights issue in December.
PharmAbcine initially planned a 30 billion won rights issue with PharmAbcine Diamond Club Companion Growth Equity No. 1 to secure funds for research, potentially leading to a change in management. However, the payment delay led to the withdrawal of the rights issue. Fortunately, Tire Bank finally acquired PharmAbcine. Still, the company could not be designated as an unfaithful discloser.
PCL's anticipated designation stems from delayed disclosure in response to rumors or reports. At the same time, Olipass faces potential designation due to significant changes in the number of shares and the amount issued in its rights offering.
In cases where a company is finally designated as an unfaithful disclosure company with eight or more penalty points, the Korea Exchange can suspend the trading of its shares for a day.
Furthermore, if the total penalty points reach 15 or more within a year, the company may undergo a substantive review for its listing eligibility on the Kosdaq market.