[비즈한국] Could the "next Coupang" emerge from the pharmaceutical and biotech industry? About five years ago, the government conducted training programs to help the industry prepare for NASDAQ listings, and only now are we finally seeing some movement toward U.S. stock market entry. The industry views this as a positive sign. There is an expectation that as more companies prepare for NASDAQ listings, cases of mergers and acquisitions (M&A) and technological cooperation with global pharmaceutical companies will become more active. However, some point out that it is still in the "initial stage" and one should not have premature expectations. Concerns are also being raised that if companies jump into the NASDAQ market without solid technology, they could end up as "penny stocks" (stocks trading for less than $1).
Strategic entry targeting "Global Clinical Trials"... Advantageous due to a culture of evaluating potential
There are about ten domestic pharmaceutical and biotech companies considering a U.S. NASDAQ listing. They mainly choose methods such as securing management rights of companies already listed on NASDAQ or listing local U.S. subsidiaries, such as joint ventures established with other firms. Major domestic pharmaceutical companies like Dong-A ST170900, as well as firms like GC LabCell144510, SCM Lifescience298060, and L&K Biomed156100, have shown interest.
Dong-A ST has already moved to secure management rights for NeuroBo Pharmaceuticals (NeuroBo), a U.S. pharmaceutical company already listed on NASDAQ. NeuroBo was founded in September 2017 by the U.S. drug development firm JK BioPharma Solutions and Roy Freeman, a professor of neurology at Harvard Medical School. Natural-product pharmaceuticals introduced by Dong-A ST are its primary pipeline. In March, Dong-A ST announced it had been delegated about 33% of the voting rights for NeuroBo. Combined with its existing 13% stake, its voting power increases to 46%.
Above all, the movement to list local U.S. subsidiaries on the U.S. stock market is the most active. Artiva Biotherapeutics, which holds technology related to Natural Killer (NK) cells, filed its registration statement on the 9th. This company is a U.S. affiliate of GC LabCell, which held a 32.0% stake in Artiva's common stock as of the end of last year. SCM Lifescience and Genexine have established a joint venture in the U.S., CoImmune, and are pursuing a NASDAQ listing.
Analysts suggest that this industry trend is a strategy focused on "global clinical trials." Lee Seung-kyu, Vice Chairman of the Korea Biotechnology Industry Organization, stated, "For companies targeting the global market, it is better to go local if they have the technical capability and the capacity. To conduct global clinical trials, you need a local sponsor. Collaborating with local experts makes it easier to prepare for global trials, and receiving approval from the U.S. FDA carries much higher value than domestic approval. The scale of investment deals can also change."
The fact that the U.S. market is an investment environment that values growth potential is also an attractive point for domestic companies. Lee Jeong-kyu, CEO of Bridge Biotherapeutics, said, "The U.S. NASDAQ market highly values a company's growth potential. Even if there is no immediate revenue, it is a favorable market for companies with high funding needs. Once listed on NASDAQ, follow-up capital increases are often carried out very actively." Coupang, which listed on NASDAQ, also recorded an operating loss of $527.73 million (approximately 594 billion KRW) last year. However, U.S. investors placed weight on the company's potential.
CEO Lee predicted that companies with the following characteristics would have an advantage in NASDAQ listings: those that have received investment from local U.S. investors, those with late-stage new drug developments and business relationships with the U.S., and those with platform technology. Lee explained, "Even ten years ago, the number of clinical trials was a key indicator. But recently, the U.S. market atmosphere values platform technology, or 'base technology.' Growth potential is judged by how many products can be created in the future using a specific technology." Another pharmaceutical industry source added, "Personalized medicine and digital therapeutics will likely gain more attention."
Some even say that a NASDAQ listing is a "path that must be taken" for domestic pharmaceutical and biotech companies. This is because the U.S. pharmaceutical market is significantly larger than Korea's. According to a report by the pharmaceutical market research firm IQVIA, the U.S. pharmaceutical market is worth $510 billion (approximately 574 trillion KRW). The average annual growth rate from 2014 to 2019 was 4.3%. While the average growth rate of the Korean pharmaceutical market during the same period was 7.3%, the market size is $16 billion (approximately 18 trillion KRW), lagging behind China, Japan, and India. The pharmaceutical market sizes for China and Japan were $141 billion (approximately 158 trillion KRW) and $87 billion (approximately 97 trillion KRW), respectively.
Attempts are positive… but considering the "Korea Premium," it is a "choice, not a necessity"
The industry views the phenomenon of domestic companies entering the NASDAQ positively. This is because it can be seen as proof that the number of competitive companies is increasing. Vice Chairman Lee Seung-kyu predicted, "If the number of domestic companies listed on NASDAQ increases, cooperation and mergers and acquisitions with iconic U.S. firms could also increase." However, since most companies are currently in the "starting stage," mostly choosing indirect methods such as listing joint ventures or investment firms on NASDAQ, many are of the opinion that we should wait and see if this will become an "industry trend."
There is also an opinion that it is more of a company's choice rather than a necessity. For example, SK Biopharmaceuticals326030, which had initially considered a U.S. NASDAQ listing, ended up listing on the KOSPI last July. An official from SK Biopharmaceuticals said, "The reason for switching from NASDAQ to KOSPI was that the SK Biopharmaceuticals headquarters is in Seoul, and the maintenance costs for a NASDAQ listing were burdensome. There was also a goal to contribute to the domestic bio-industry and the revitalization of the stock market." An official from a biotech company planning a KOSDAQ listing said, "We do not necessarily consider entering the NASDAQ because there are no competing products in the domestic market."
There is also talk that a NASDAQ listing will not be easy to achieve due to the "Korea Premium" attached to domestic pharmaceutical and biotech companies. A securities firm researcher said, "Stock prices can be formed at much higher levels if listed in Korea." However, there are counterarguments. CEO Lee Jeong-kyu pointed out, "It might be good from the investors' perspective. But if the stock price is too high, capital increases might become difficult. If the company size becomes excessively inflated beyond a reasonable price, the acquisition itself can become difficult to finalize."
However, the common opinion in the industry is that the core of a NASDAQ listing or company growth is how much "technical strength" a company possesses. A professor of pharmacy emphasized, "To be recognized and attract capital in the NASDAQ, the essence is technology. Opportunities are open to all companies, but success depends on the competitiveness of the technology itself." CEO Lee also stated, "There are so many biotech companies listed on the NASDAQ. To stand out there, you must have unique characteristics. Without that, you cannot rule out the risk of becoming a 'penny stock' and facing delisting."