Exclusive
Panacea Accused by Minority Shareholders of 'Intentional Delisting'

[비즈한국] Allegations of intentional delisting and capital outflow have been raised regarding Panacea, a company that was once listed on the KOSDAQ but has since been delisted. The company, which was previously implicated in the ‘Lime Scandal,’ was fined approximately 700 million KRW by financial authorities last May for violating accounting standards. It has been confirmed that a minority shareholder of Panacea recently reported Shin Yong-kyu, CEO of NewLake Alliance Management (NewLake)—the private equity fund at the pinnacle of the company's governance—to financial authorities for unfair trade practices under the Capital Markets and Financial Investment Business Act (Capital Markets Act).

Delisted After Nearly 4 Years of Trading Suspension Without Regular Exit Sales… Paid-in Capital Reduction Implemented

Panacea, a manufacturer of PCB automation equipment and a producer of heat packs, was founded in 1994 as Hansong Industry and was listed on the KOSDAQ in February 2002. Since then, the company has changed its name and business objectives several times—including stints as Equis Farm, Equis & Jaru, Crea Planet, and Supex B&P—before adopting its current name in August 2021.

Trading of Panacea was suspended in September 2020 due to embezzlement and breach of trust by its management, which triggered a review of its eligibility for continued listing. Later, Invite Ventures, a company belonging to the pharmaceutical and biotech group "Invite Ecosystem" and an affiliate of NewLake Alliance Management, became the largest shareholder by acquiring a 34.86% stake through paid-in capital increases of 7.6 billion KRW in July 2021 and 4.3 billion KRW in May 2023.

Minority shareholders, who endured a trading suspension lasting nearly four years, had hoped for a resumption of trading and management normalization following the change in control. However, in June 2024, Panacea was suddenly expelled from the KOSDAQ market. Although the KOSDAQ Market Committee had decided to delist the company on July 24, 2023, an improvement period had been granted until September 11, 2024, after the company filed an appeal.

The reason Panacea was expelled during the improvement period was its pursuit of a merger with Pangen222110, a biopharmaceutical company. At the time, Pangen's largest shareholder was CG Invites000490 (formerly CrystalGenomics), which owned 100% of Invite Ventures, meaning Panacea and Pangen shared the same parent company.

The KOSDAQ Market Committee determined that the merger with Pangen was problematic regarding management continuity and transparency. Regarding continuity, it noted that Panacea’s profitability had deteriorated, with Q1 2024 revenue of approximately 2.5 billion KRW and an operating loss of 2.1 billion KRW, far below the improvement plan targets (7.6 billion KRW in revenue and a 30 million KRW operating loss).

Furthermore, contrary to the plan (September 2023) to "prevent capital outflow through M&As with profitable companies unrelated to the largest shareholder and related parties," merging with Pangen, a loss-making affiliate, was seen as evidence of a lack of commitment to management improvement. In terms of transparency, the fact that CG Invites was the largest shareholder of Pangen was a key issue, as the structure prevented the company from making independent decisions from its largest shareholder after the merger.

Ultimately, Panacea proceeded with delisting on June 25, 2024. Because the company was to be absorbed and dissolved with new shares issued by Pangen, no regular exit sales (stock liquidation) were conducted. Panacea responded to the exchange's delisting decision by filing for an injunction to suspend its effect, but the court denied the request.

"Capital Outflow for the Benefit of Major Shareholders" vs. "Acquisition for New Business"

The problem is that the merger between Panacea and Pangen fell through after the delisting, as the merger agreement included a condition precedent that "the status as a listed entity must be maintained." Pangen was later acquired by Huons in November 2024. Around the same time, Panacea carried out a paid-in capital reduction (buying back shares to reduce capital), and many minority shareholders sold their stakes. Following the capital reduction, the stake of the largest shareholder, Invite Ventures, increased to 57.77%.

A minority shareholder who experienced this series of events reported Shin Yong-kyu, CEO of NewLake, to the Financial Supervisory Service this past June for unfair trade practices under the Capital Markets Act. The reasons cited included driving Panacea to delisting by causing the merger with Pangen to fail, and causing financial harm to investors by draining Panacea's capital through investments in companies associated with CEO Shin. CEO Shin concurrently serves as the chairman of the Invite Ecosystem, which encompasses Panacea and its related companies.

The investment in question regarding capital outflow refers to Panacea's 100% acquisition of "HealthConnect," a digital healthcare firm, last April. HealthConnect was founded in 2011 as a joint venture between Seoul National University Hospital and SK Telecom, focusing on healthcare services and smart hospital construction.

At its launch, Seoul National University Hospital held a 50.5% stake and SKT held 49.5%, but from 2018, NewLake (KTB NewLake Medical Global Expansion Private Equity Fund) began acquiring shares, bringing it into the Invite Ecosystem. In March 2020, SKT established Invite Healthcare, a digital healthcare joint venture with NewLake, and transferred its stake in HealthConnect. By the end of 2024, just before Panacea’s acquisition, the shareholder composition was 33.7% for Seoul National University Hospital, 33.0% for Invite Genomics (formerly Invite Healthcare), and 33.3% for NewLake.

The aforementioned minority shareholder claimed, "Panacea had no history of new drug development, and HealthConnect has been a loss-making company since its inception. Discussions regarding its liquidation took place in 2018 due to accumulated losses, and it is difficult to expect a turnaround due to medical law regulations. There is no reason to acquire it." The shareholder added, "HealthConnect is an affiliate where Chairman Shin Yong-kyu serves as the representative. Essentially, Panacea's assets were drained to benefit the major shareholder. It is suspected to be a capital-stripping M&A."

Panacea denied all such allegations. Lee Ho-young, CEO of Panacea, responded to the intentional delisting claims by stating, "The delisting was a decision made by the exchange. Pangen was a listed company with decent performance; the merger was a rational business choice." He argued, "We returned 12 billion KRW to shareholders through the paid-in capital reduction. We did our best to ensure shareholders did not suffer losses. If the delisting had been intentional, we would have proceeded with exit sales."

Regarding the acquisition of HealthConnect, he explained, "Securing orders for PCBs is difficult, and the heat pack business has suffered from accumulated losses. We only acquired the heat pack company (Jeulgeoun Shopping) due to past instructions from the exchange, and we are currently in the process of selling it. After careful consideration, we chose the digital healthcare industry as our new business and acquired HealthConnect. This change in business purpose was approved at the shareholders' meeting in March 2024."

He continued, "We went through valuations by three accounting firms before acquiring the stake in HealthConnect and purchased it at the lowest price. We did not overpay." He emphasized, "HealthConnect turned a net profit in the first half of this year. We are currently aiming for re-listing alongside our new business."

Panacea was recently sanctioned by financial authorities. Last May, the Financial Services Commission imposed a 740 million KRW fine on Panacea for disclosing financial statements that violated accounting standards. Further sanctions included a two-year designation of an external auditor, corrective orders, and a notification to the prosecution. A total of 310 million KRW in fines was also imposed on five former executives, including the CEO.

The company's past ties to the Lime Asset Management scandal are also notable. From 2018 to 2019, Supex B&P (the company's name at the time) received investment funds from Lime Asset Management, which were later embezzled by an executive. It is known that Supex B&P also pursued a resort project in Cambodia with Lime.