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A researcher at a South Korean biotech company works on new drug development A South Korean bio startup aims to list on Nasdaq as the country’s exchange sets the bar high for an initial public offering of a venture in the sector.South Korea’s pH Pharma is seeking a backdoor listing on Nasdaq through a merger with a special purpose acquisition company (SPAC) listed on the US tech-heavy stock exchange, according to the domestic bio-industry sources on Thursday.The biopharmaceutical company is considering measures for the listing such as a merger of Peak Bio, its subsidiary set up in March, with a SPAC. pH Pharma will transfer some of the new drug candidates to the unit.Other South Korean bio startups are expected to follow the suit, industry sources said.“Requirements for listings are so strict that bio companies have difficulties in fundraisings. That could accelerate their moves to list in foreign stock markets,” said one of the sources.Last year, only nine bio startups went public through eased rules for companies with prominent technologies, about a half of 17 firms that were listed in 2020 via the special favor.pH Pharma had tried to list on the country’s junior Kosdaq in early 2020, but it dropped the plan due to the Korea Exchange’s (KRX) tough requirement. It ran out of money for clinical trials its cash holding at mere 2.1 billion won ($1.7 million) as of the end-2021, in the meantime.The startup, founded in 2015, adopted the ‘no research, development only (NRDO)’ model, a strategy to buy promising new drug candidates from others and resell them or obtain approvals after clinical tests, rather than developing its own. Kosdaq-listed Bridge Biotherapeutics Inc. has a similar business model.FORCED TO GO GLOBALA Nasdaq listing is a great opportunity for a startup to raise money from global investors that recognize its technology. But pH Pharma is seeking the move since it faced difficulties in securing funds in South Korea amid the sluggish local IPO markets and stringent requirements for a listing in the country.The startup has been in the spotlight for its NRDO business among investors. It successfully raised 90 billion won from investors in 2019.However, it has been in trouble since early 2020 when it failed to list on the Kosdaq. The KRX took issue with its other businesses such as cosmetics to make money for clinical trials during a review for the IPO, causing the company to cancel the listing plan in June 2020.“The KRX may have lacked an understanding of its business model of importing candidates from others and reselling them after clinical tests,” said an industry source.The NRDO is an emerging business model in the industry. The corporate value of Roivant Sciences, the world’s top NRDO company, was estimated at some $7.3 billion.pH Pharma virtually suspended clinical tests of new drugs after it failed to go public. It secured approval for the phase 3 clinical trials in South Korea, the final stage to get permission for marketing, of glaucoma treatment in May 2021, but it has not even started the tests for nearly a year. In the UK and Ireland, the startup obtained approval for the phase 2 clinical tests on a medicine for a rare genetic respiratory disease, but it could not progress due to funding issues.The company had planned to resume the listing process last year but gave up as the KRX required the results of clinical tests that prove both the safety and efficacy of new drugs.“It means they will approve (a listing) only when a company is conducting the phase 2 clinical trials at least,” said an industry source. “They also mean that no biotech company will be allowed to conduct large-scale clinical tests with funds raised from an IPO.”But the KRX said the exchange should protect investors.“A listing of a bio venture with an opaque financial condition that is working on clinical tests in early stages with uncertainties on success will pose a risk to individual investors,” said a KRX source.FEW ISSUES FOR NASDAQ LISTINGSOther South Korean bio startups faced similar issues. Aprilbio Co., which signed a 540 billion won deal to export autoimmune disease treatment technology to Danish drugmaker Lundbeck, failed to pass a listing review of the KRX.The exchange reportedly disapproved a listing of D&D Pharmatech, requiring the results of clinical tests to prove the efficacy of new drugs. Future Medicine Co., Enzynomics Co. and Y-Biologics withdrew their applications for preliminary reviews of their IPOs. Nasdaq headquarters in New York (Courtesy of AFP, Yonhap) Those bio startups may seek IPOs in Nasdaq as the South Korean bio sector has been expanding its presence around the world by exporting technologies worth billions of dollars, industry sources said.“They will face few issues for a Nasdaq-listing as long as they meet basic requirements,” said a source at a local venture capitalist.By Jae-Young Hanjyhan@hankyung.comJongwoo Cheon edited this article.
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