April 26, 2024

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[THE INVESTOR] Shares of Korean biotech firm Nature Cell surged over 14 percent on Aug. 6, the first trading day after CEO Ra Jeong-chan was indicted on charges of manipulating the stock price with false and misleading information regarding its flagship stem cell therapy last week.

The stock closed 14.37 percent higher at 5,650 won (US$5.02), partially recovering from a sharp drop of 29.72 percent on Aug. 3 when the Seoul Southern District Prosecutors’ office indicted Ra for allegedly pocketing 23.5 billion won by violating the capital market law. 

Nature Cell CEO Ra Jeong-chan

The company’s three other executives -- CFO, PR director and law department director -- were indicted without detention, charged with conspiracy to commit the financial crime.

“We will recover the unfair benefits that the suspects have illegally acquired,” a prosecution official said.

After announcing fabricated clinical data on its degenerative arthritis treatment JointStem to the public, its share price surged over 10 times to 64,400 won from below 5,000 won until mid-March when the country’s health regulator refused approval for the drug, citing insufficient clinical data to support its efficacy.

According to prosecutors, the company’s executives have started publishing news articles on its in-house medical journal platform that JointStem had successfully completed clinical trials in June 2017. The company also sent press releases alluding that it succeeded in developing the new drug, which has not proven its clinical efficacy.

Ra is also suspected of selling Nature Cell stocks in large quantities for the repayment of debt in February, and falsely disclosing the use of funds for sale as the development costs of stem cells.

He was arrested in 2013 on embezzlement charges. The court handed down a three-year jail sentence, suspended for four years in 2015.

By Park Han-na (hnpark@heraldcorp.com)