Korea’s Economic Domino Effect: How a Nasdaq Biotech Crash Could Spark a 33% Downfall
Korean KOSDAQ Market Listing Regulations Hinder Bio-Industry Growth
The Korean bio-industry is facing significant challenges due to the country’s listing regulations, which fail to account for the unique characteristics of the industry. A recent study found that one-third of the top 200 bio-industry companies listed on the US NASDAQ market would be subject to management stock suspension if they were listed on the Korean KOSDAQ market.
Stringent Listing Requirements
The Korea Economic Daily commissioned The All Accounting Firm to apply KOSDAQ listing regulations to the top 200 NASDAQ-listed bio companies. The results showed that 65 companies, or 32.5%, did not meet the requirements for ‘net loss before corporate tax expenses’ or sales and capital requirements. These companies, with a market cap of 255 trillion won, are primarily focused on research and development (R&D) and often suffer large losses.
Impact on Innovation
The industry is concerned that these regulations will stifle innovation and hinder the growth of the domestic bio-industry. An industry insider noted that in the US, it is rare to find companies that engage in unrelated businesses to maintain their listings. In contrast, Korean companies are often forced to diversify their businesses to meet the listing requirements, which can divert resources away from R&D.
Case Studies: Madrigal Pharmaceuticals and Alnylam
Madrigal Pharmaceuticals, the world’s first developer of a treatment for metabolic abnormality-related steatohepatitis (MASH), is a prime example of the challenges faced by bio-companies. The company had zero sales for five years until last year, as it focused on developing a MASH treatment. Similarly, Alnylam, the world’s largest developer of RNAi therapeutics, would not meet the KOSDAQ listing requirements due to its significant R&D investments and accumulated losses.
Viking Therapeutics: A Rival to Novo Nordisk and Eli Lilly
Viking Therapeutics, an American biotech company, is another example of a company that would struggle to meet the KOSDAQ listing requirements. The company has not had any sales for the past five years, as it focuses on developing innovative treatments for obesity.
Conclusion
The Korean bio-industry is facing significant challenges due to the country’s listing regulations. The industry is calling for reforms that take into account the unique characteristics of the bio-industry, which requires long-term R&D investments. By relaxing the listing requirements, the Korean government can create a more favorable environment for bio-companies to innovate and grow.