[Edaily Reporter YU JIN-HEE ] Following the government’s measures to tighten KOSDAQ listing maintenance requirements, the first delisting case has occurred in the pharmaceutical and biotech industry. KMPHARMACEUTICAL Co.,Ltd., a small but strong company specializing in oral and skincare products for infants and toddlers, failed to meet the market capitalization requirement and ultimately received a delisting notice.

According to the financial investment industry, the KOSDAQ Market Division of the Korea Exchange has finalized delisting procedures for KMPHARMACEUTICAL Co.,Ltd.(225430)due to its failure to meet the market capitalization requirement for common stock and will begin liquidation trading next week.

This is the first delisting in the pharmaceutical and biotech industry following fashion company WonpungMulsan, among others, since financial authorities raised the KOSDAQ market capitalization floor from 15 billion won to 20 billion won last July to accelerate the removal of struggling companies.

Failed to rebound after being designated a “monitored stock” in July… Delisted as market cap fell below 10 billion won

According to the stock exchange’s strengthened listing maintenance regulations, a company is designated as a “monitored stock” if its common stock market capitalization remains below 20 billion won for 30 consecutive trading days. To avoid delisting, the company must maintain a market capitalization of at least 20 billion won for at least 45 consecutive trading days within 90 trading days of the designation date.

KMPHARMACEUTICAL Co.,Ltd. was designated as a “monitored stock” on July 9 after accumulating insufficient market capitalization. During the subsequent 41 trading days, the company failed to meet the 20 billion won market capitalization requirement even for a single day. As it became mathematically impossible to meet the requirement for 45 consecutive days within the remaining period, the grounds for early delisting were established.

The KOSDAQ Market Headquarters made a final determination that it was impossible for KMPHARMACEUTICAL Co.,Ltd. to meet the criteria for delisting revocation, as the number of days on which its common stock market capitalization fell below 20 billion won continued for five consecutive trading days. Compounded by a recent decline in its stock price, KMPHARMACEUTICAL Co.,Ltd.’s market capitalization has fallen below the 10 billion won mark, losing momentum for recovery.

This delisting is a painful outcome. KMPHARMACEUTICAL Co.,Ltd. had recently been making visible progress toward a turnaround in its core business and was accelerating efforts to improve its corporate structure. Since its establishment in 2001, the company has solidified its unrivaled position in the domestic infant and toddler oral care products market, led by its “Pororo Toothpaste.”

Although the company had posted consecutive losses over the past four years due to soaring raw material prices and research and development (R&D) expenses, it showed a clear rebound this year. Cumulative sales from its oral care partnership with Weleda, a 100-year-old Swiss natural and organic cosmetics and pharmaceutical company, exceeded 7 billion won.

According to global market research firm Fortune Business Insights (FBI), the global oral care market is projected to grow from $32.6 billion (approximately 45 trillion won) in 2023 to $46.5 billion (approximately 65 trillion won) in 2032.

In line with this trend, the company has diversified its business into skincare and scalp care by launching its second factory in Pyeongtaek, Gyeonggi Province.

It has maintained certification of compliance with the U.S. Food and Drug Administration’s (FDA) Current Good Manufacturing Practice (cGMP) standards for over-the-counter (OTC) products for eight consecutive years. This has solidified its foothold in U.S. OTC exports. Sales in the first half of this year reached 8.3 billion won, a 13.4% increase compared to the same period last year. The company was on track to once again surpass 20 billion won in annual sales.

Baek Seung-won, CEO of KMPHARMACEUTICAL Co.,Ltd., carried out a capital increase that included a personal contribution from the CEO. Although the company made every effort to improve its financial structure through asset restructuring—such as buying back its own shares and selling its Seoul headquarters—there was simply not enough time to meet the stock exchange’s stricter listing requirements.

Outlook for KONEX Relisting Remains Uncertain… Fear of Stock Market Delisting Spreads

The market focused on whether the system allowing delisted companies to transfer their listings to the KONEX market would apply. Financial authorities have been pushing a plan to grant KONEX transfer opportunities to companies that have no negative equity and have posted operating profits in two of the past three years. Since the full implementation of the revised regulations is scheduled for the 23rd, it remains unclear whether they will be applied retroactively to companies currently designated as “under supervision.”

KMPHARMACEUTICAL Co.,Ltd. finds it difficult to meet these requirements due to operating losses that have persisted for several years. Consequently, the exchange plans to suspend trading of its shares shortly and begin a seven-trading-day liquidation sale process starting early next week. Since price limits do not apply during the liquidation sale period, massive investment losses for shareholders are inevitable.

An official in the biotech venture industry stated, “Even manufacturing companies with proven technological capabilities that have laid the groundwork for a turnaround in performance have collapsed without a chance to react in the face of the stricter market capitalization criteria,” adding, “Fear of delisting will spread uncontrollably among small-cap listed pharmaceutical and biotech companies whose market capitalization hovers around 10 billion won.”

An official from KMPHARMACEUTICAL Co.,Ltd. explained, “We are taking legal action to protect shareholder value by filing a motion for a preliminary injunction to suspend the effectiveness of the Korea Exchange’s decision to designate us as a ‘monitored stock.’” The official continued, “We recently submitted the motion for a preliminary injunction to the Seoul Southern District Court through a law firm, and the core of the motion is to request that the effectiveness of the Korea Exchange’s July 9 decision to designate us as a ‘monitored stock’ be suspended until the final judgment on the main case is confirmed.”

The spokesperson continued, “Through this application, we have requested the court’s ruling on the legal issues arising from the application of listing regulations in connection with the decision to designate the stock as a ‘monitored stock,’” and added, “We will transparently share key developments with our shareholders and the market.”