April 26, 2024

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[THE INVESTOR] The Financial Supervisory Service on Aug. 17 announced strengthened disclosure requirements for biotechnology and pharmaceutical companies starting with their third-quarter earnings reports. The aim is to help investors obtain a more accurate picture of their business. 

“The purpose of these measures are to make them present detailed information in their disclosure reports in a systematic manner after we found that many pharma and biotech companies aren’t properly disclosing the unique investment risks in their sector,” the financial regulator said in a statement. 

The deadline for third-quarter earnings reports is Nov. 15.

Under the new rules, firms are required to clearly stipulate data related to their new drug development in the research and development activities section while details of license agreements should be stated in the major contract section.

The FSS will provide an exemplary business report that the companies can use as reference to give stakeholders better access to their corporate information.

R&D costs have been divided to notify shareholders whether they government subsidies are included, while licensing agreements are separated from the sales contracts category. The profiles of key researchers and their qualifications, such as research papers at international-level academic journals, have also been included.

The FSS has been looking to strengthen monitoring of local pharma and biotech stocks whose disclosures are often delayed or even omitted altogether, leaving investors confused and sending stock prices on roller-coaster rides.

In June, it noted that around 95 percent of the total of 163 listed drug makers and biotech firms were negligent in reporting their R&D activities and key contracts.

The FSS is now recommending investors to check key indicators before capital allocation including the company’s record of past research results, global clinical trial process of new drug candidates, competitive product development status, as well as the fact that approximately only one in 10 drugs that start clinical studies make it to the market.

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