According to the securities, pharmaceutical, and biotech industries on the 30th, companies such as Immunis Bio, J2H Biotech, Glaseum, and Hutom failed to clear the technical evaluation threshold this year. While the specific reasons for each company’s rejection have not been disclosed, industry observers note that feedback regarding business viability—including profitability, revenue growth potential, and funding plans—has become more specific and stringent than in the past.
The Technology-Based Special Listing is a system designed to provide listing opportunities to companies that do not meet revenue and profit requirements, based on their technological capabilities. To file a request for preliminary review, a company must receive a grade of A from one specialized evaluation agency and a grade of BBB or higher from another, both designated by the Korea Exchange.
However, there is a growing consensus that, recently, evaluation agencies and the exchange have been scrutinizing post-listing sustainability just as rigorously as they do technological capabilities. It is no longer sufficient to simply have entered clinical trials or possess candidate compounds; companies must demonstrate business visibility—specifically, when and how they will generate revenue.
Examples of companies that have passed the preliminary review also demonstrate how concrete their approach to translating technology into a business is. BreezeBio received AA and A ratings by highlighting its non-viral gene delivery platform, “NanoGalaxy.” Although its pipeline is still in the early stages of development, its strength lies in demonstrating the platform’s potential and future business opportunities through a joint research and licensing agreement with the global pharmaceutical company Genentech. It is reported that MBD’s evaluation was positively influenced by its relatively clear demonstration of the target market and revenue streams for its patient-derived organoid-based drug response analysis technology.
An IPO official at a securities firm stated, “While we cannot immediately demand product sales from a new drug developer, the company must at least present a concrete path to raise funds and sustain its business through technology transfers, joint development, or value appreciation at each clinical stage,” adding, “Nowadays, the ability to explain a technology through business plans and numbers has become just as important as the technology’s distinctiveness.”
As evaluation agencies scrutinize the basis for revenue projections just as closely as they do a technology’s originality and competitive advantage, the burden on biotech drug developers has grown even heavier. New drug development is an industry that requires a long time and massive funding, from candidate discovery through preclinical and clinical trials to approval. Even with outstanding technology, it is difficult to generate revenue by selling products immediately. In contrast, the medical device, diagnostics, and precision medicine sectors are generally considered to have a relatively easier time explaining their commercialization pathways, as they can generate revenue from clients and hospitals at a relatively early stage following approval and service launch.
The CEO of a biotech company explained, “To go public (IPO), you ultimately have to meet the requirements,” adding, “Management is constantly drawing up plans by working backward to determine what needs to be done by when.” He continued, “It’s no longer enough to just develop a pipeline; companies must also demonstrate revenue and commercialization plans, making it even more difficult to pass the review process.”
The shift toward a more conservative screening stance stems from issues of market confidence surrounding listed companies. Following the Padu scandal, expectations regarding growth projections and the reliability of disclosures have risen, and the market continues to react sensitively to clinical and commercialization information from biotech firms, as seen in the recent Samchundang Pharmaceutical incident. In addition, as discussions are underway to overhaul the listing and delisting system—including the introduction of the so-called “promotion-demotion system”—to restore trust in the KOSDAQ market and enhance its competitiveness, analysts note that the stock exchange and rating agencies are placing even greater emphasis on minimizing the risk of financial instability from the very beginning of a company’s listing.
Amid this climate, biotech companies preparing for an IPO are also appearing to slow down their pace. Some companies that had been preparing for a preliminary review with the goal of filing a request within the year are now reevaluating their schedules while monitoring recent evaluation results and market conditions. Rather than relying solely on clinical progress, they are strengthening their case through technology transfer negotiations, joint development agreements, and securing initial revenue before rescheduling. There has also been an increase in cases where companies undergo preliminary technical evaluations or seek external consulting prior to the main evaluation.
If a company fails to secure the minimum grade required for a preliminary review application in the technical evaluation, it cannot reapply for six months. Considering the time needed to prepare evaluation materials again and address any deficiencies in business viability requirements, the actual IPO schedule could be delayed by about a year, which explains why companies are taking a more cautious approach.
Of course, some in the industry argue that the review process for the technology-based listing exemption should not be based solely on whether a company has revenue. Since new drug development takes a long time—from technology validation through clinical trials to approval—evaluating companies based on short-term performance could actually cause early-stage innovative companies to lose their opportunity to enter the capital market.
A biotech industry official stated, “The technology evaluation is a system designed to recognize the growth potential of innovative companies—which are difficult to assess based solely on immediate performance—and grant them the opportunity to go public,” adding, “If too much weight is placed on immediate revenue or profitability, early-stage new drug development companies, which need pre-IPO funding the most, may actually lose their chance to enter the market.”
