The bankruptcy of Silicon Valley Bank (SVB), a major lender to U.S. startups and venture capitalists, has sent the Korean biopharmaceutical industry on high alert.
The bankruptcy has resulted in the share price of numerous U.S. biotech companies, who have deposited funding with the bank, plummeting.
The Korean biopharmaceutical industry is concerned that bankruptcy may affect them because some Korean biopharmaceuticals have either invested in or are collaborating with companies tied to SVBs.
Shares of Axsome Therapeutics, which holds the global commercial rights to SK Biopharmaceuticals’ sleep disorder drug Sunosi, plunged 11.38 percent on Friday after reports showed that the company deposited funds with SVB.
According to news reports, Axsome deposited its main operating funds with SVB.
However, Axsome said the deposit with SVB is unlikely to have a significant impact, while deposits and loans held at other banks are sufficient for its operations.
Also, as the Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC) issued statements that they would guarantee the full amount of the SVB deposits, industry watchers expect that the bankruptcy will not have a great impact on Axsome’s operation.
"It is difficult for us to comment on Axsome's position because it is our partner company," an SK Biopharmaceuticals official told Korea Biomedical Review. "Regarding the impact of SK Biopharmaceuticals, there will be no change in our contract with Axsome."
Among the U.S. biotechs with ties to Korean pharma and biotech firms, shares of NeuroBo Pharmaceuticals, which Dong-A ST incorporated as a U.S. subsidiary last December, fell 9.59 percent on Friday.
NeuroBo Pharmaceuticals received a $15 million loan from SVB in 2017.
However, Dong-A ST reported on Monday that the loan was repaid in full in 2019, and there is no longer any connection between SVB and NeuroBo.
Despite the Korean biopharmaceutical industry being on alert, an expert in the investment sector said the impact of SVB's bankruptcy on Korea's biopharmaceutical industry will be limited.
"The damage to Korean biopharmaceutical companies from the SVB bankruptcy is unlikely to be significant," said NH Investment & Securities' Equity Capital Markets Division Head Kim Joong-kon said. "On the contrary, if the U.S. interest rate hike is delayed due to the bankruptcy of SVB, I expect that it will have a beneficial effect."