The biotech industry is losing trust from investors as some executives at these companies which have recently bungled their phase 3 clinical trials are suspected of selling off their shares in advance using undisclosed information.
Most recently, Helixmith investors raised suspicion that people with a special relationship to the company might have used undisclosed information and sold their stocks in advance.
According to the electronic disclosure system of the Financial Supervisory Service, Lee Hye-rim, the wife and daughter of former Helixmith CEO Kim Yong-soo sold 2,500 shares and 500 shares, respectively, on Monday. The combined worth of shares sold amounted to 539 million won ($448,500).
Former CEO Kim has also been selling off his stake since he left the company in August last year. Kim is known to have sold more than 100,000 shares and gained about 30 billion won in the process. Kim Yong-soo is the brother-in-law of the founder and largest shareholder, Kim Sun-young, the current president of Helixmith.
Although the amount was relatively small, the wife and daughter of the former CEO raised stirs by disposing of portions of their stocks a day before Helixmith announced its failure to conclude the phase 3 clinical trial due to a mix between the placebo and treatment groups. Considering that the company's stocks plummeted after the announcement, investors claim that their suspicion is not farfetched.
The company swiftly denied the allegations.
"We thoroughly managed the internal information," a company official said. "It was only a coincidence that the stock was sold before the disclosure of the clinical trial."
CEO and founder Kim Sun-young also vehemently denied the allegations. "Why would I give inside information to my brother-in-law and not my direct family? Also, if we knew about the undisclosed information, wouldn't we have sold 10,000 or 100,000 shares instead of 3,000 shares?" Kim said.
Despite the company's explanation, some investors have started calling Helixmith the second Sillajen. Sillajen is under investigation by the prosecutors' office under similar suspicion that its key executives sold their shares in advance after predicting that the drug would fail in a futility test.
In early July, an executive at Sillajen suddenly sold more than 160,000 shares. Shin Hyun-pil, chief science officer of Sillajen in charge of new businesses, sold all of his 167,777 common stocks on four transactions between July 1 and July 8. Shin gained about 8.8 billion won through the selling.
The massive selling came just one month before the disclosure of the result of the futility analysis on Pexa-Vec. The company said Shin sold the shares for personal reasons, such as paying taxes and repaying the personal debt.
However, the prosecution carried out simultaneous raids on Sillajen's Busan headquarters and its Seoul office over allegations on Aug 28. Despite the raid, the company continued to deny the allegation. “The investigation was limited to only some of the employees, and we intend to cooperate with the investigation fully," the company said.