Biotech firms with net loss overestimate their performance

'Companies aim for surplus once listed'

All 15 surveyed companies that were listed this year under the Technology Exception Listing system were in a net loss position…aim for tens of billions in surplus

Critics point out that biotech companies are more likely to 'overestimate' their future estimated performance and comparables when calculating public offering prices

While Korean biotech and healthcare companies are using the Technology Exception Listing system to challenge the Initial Public Offering (IPO) market, there have been concerns over their valuation methods.

 

Critics argue that some companies are excessively inflating their valuations by presenting overly optimistic estimates of future performance or by selecting comparables that are significantly larger and established at the public offering price.

 

All 2024 listed biotech companies are in deficit, but the futue estimated earnings used for IPO price show tens of billions in surplus According to the Financial Supervisory Service (FSS) on the 12th, a total of 10 biotech and healthcare companies have been listed through the Technology Exception Listing system this year.

 

Starting with Orum Therapeutics in February, OrganoidSciences, ROKIT Healthcare, ImmuneOncia, and IntoCell were listed in May.

 

GC Genome debuted on the stock market in June, followed by Neurofit and Protina in July.

 

G2GBIO and Graphy entered the KOSDAQ market in August.

 

Other companies are also pursuing listings through the Technology Exception Listing system, with Curiosis, AimedBio, Rznomics, QuadMedicine, and LivsMed having submitted IPO registration statements to the Financial Services Commission.

 

The Technology Exception Listing system is a regulatory measure designed to lower the listing barrier for companies with technology and growth potential but that lack profitability.

 

It is considered the primary IPO channel for biotech companies that invest massive amounts in new drug development without clear revenue streams.

 

Most companies listed via the Technology Exception Listing system use the Relative Valuation Method to calculate their public offering price.

 

The prevalent method involves applying the Price-to-Earnings Ratio (PER) of comparable listed companies in the same industry to the listing applicant's estimated future earnings.

 

The PER, calculated by dividing the stock price by earnings per share, is an index that comprehensively reflects a company's profitability, risk, and market valuation from its operating activities.

 

Thus, future growth potential, rather than current earnings, becomes the core criterion for the public offering price.

 

However, the problem is that the public offering price is often calculated higher than its actual value due to questionable practices in estimating future earnings and selecting comparable companies.

 

An analysis of the registration statements of 15 biotech and healthcare companies that listed or are pursuing listing via the Technology Exception Listing system this year showed that not a single company was profitable in 2024.

 

All 15 surveyed companies were in a net loss position.

 

Despite this, most of these companies projected they could achieve a net profit of KRW 10-90 billion within 2-3 years.

 

They claim significant results can be achieved through early technology exports from underdeveloped pipelines, product approvals, and product sales.

 

"2025 Biotech and healthcare companies that were listed using the Technology Exception Listing system.

 

Their estimated profit and the actual net profit when listed"; COLUMN1 (COMPANIES): Orum Therapeutics, OrganoidSciences, ROKIT Healthcare, ImmuneOncia, IntoCell, GC Genome, Neurofit, Protina, G2GBIO, Graphy, Curiosis, AimedBio, Rznomics, QuadMedicine, and LivsMed; COLUMN2 (2024 NET PROFIT in KRW 100M); COLUMN3 (FUTURE ESTIMATED NET PROFIT).

 

(source: Financial Supervisory Service)

AimedBio reported the highest future estimated net profit, projecting KRW 87.1 billion by 2029.

 

This is an aggressive target, considering AimedBio recorded a consolidated net loss of KRW 3.3 billion last year.

 

LivsMed, which recorded a consolidated net loss of KRW 13.9 billion last year, projected an estimated net profit of KRW 71 billion by 2027.

 

Rznomics, which recorded a separate net loss of KRW 18.9 billion last year, projected net profits of KRW 35.3 billion in 2027, KRW 2.9 billion in 2028, and KRW 67.2 billion in 2029.

 

G2GBIO showed the largest gap between current earnings and future estimates.

 

G2GBIO reported a separate net loss of KRW 83.3 billion last year, yet the company projected a net profit of KRW 40 billion by 2029.

 

ImmuneOncia projected KRW 51.7 billion by 2028; Neurophit projected KRW 9.1 billion in 2027 and KRW 28.9 billion in 2028; and IntoCell projected KRW 24 billion in net profit by 2027, all of which were used as bases for calculating their public offering prices.

 

Orum Therapeutics was the only surveyed company that reflected actual earnings, not future estimates, in its public offering price calculation.

 

The company calculated its corporate value using net profit based on its Last Twelve Months (LTM) ending Q3 2024 (which combined performance from Q4 2023 to Q3 2024).

 

This allowed the company to set its public offering price based on actual earned revenue, primarily driven by technology fees from a large-scale technology export agreement with a global big pharma, rather than on mere projections.

 

However, whether the proceeds from technology exports are one-time or sustainable still needs to be assessed.

 

Although not included in the public offering price calculation, Orum Therapeutics projected it could achieve KRW 75.2 billion in sales and KRW 34.7 billion in net profit in 2026.

 

This calculation is based on the premise of securing additional technology export agreements alongside the inflow of milestones from existing contracts.

 

Comparison to big pharma, multi-trillion-won global firms included...overvaluation has been pointed out Analysis suggests that not only are the future earnings projections presented by the listing companies overly optimistic, but the selection of comparable companies also lacks justification.

 

A review of the similar companies selected by the 15 surveyed firms shows a high proportion of major pharmaceutical companies like Hanmi Pharmaceutical, Chong Kun Dang, and Daewoong Pharmaceutical.

 

Unlike the pre-listing companies, which are not generating profit, these comparables boast annual revenues exceeding KRW 1 trillion.

 

A significant number of firms also presented overseas companies as comparables.

 

GC Genome, the genomics analysis affiliate of Green Cross Group, selected four comparable companies, including the domestic firm Boditech Med, along with Revvity, Hologic, and Diasorin.

 

Except for KOSDAQ-listed Boditech Med, the other three companies in GC Genome's peer group are overseas-listed global diagnostic firms with annual revenues in the trillions of KRW.

 

Protina also included Danaher and Revvity in its peer group, and Graphy selected all overseas firms as comparables, including Align Technology, Straumann Holding AG, and Modern Dental Group.

 

Curiosis and LivsMed also included a large number of major global companies with net profits in the trillions of KRW in their comparable groups.

 

Comparables and PER discount rate of biotech and healthcare companies listed in 2025 using the Technology Exception Listing system.

 

COLUMN1 (COMPANIES): Orum Therapeutics, OrganoidSciences, ROKIT Healthcare, ImmuneOncia, IntoCell, GC Genome, Neurofit, Protina, G2GBIO, Graphy, Curiosis, AimedBio, Rznomics, QuadMedicine, and LivsMed; COLUMN4 (per-share valuation calculation).

 

(source: Financial Supervisory Service)

The inclusion of conglomerate companies in the comparable groups also led to higher PERs in the per-share valuation calculation.

 

LivsMed's calculated PER, based on the market value of its peer group, was 45.5 times, the highest applicable PER among the 15 surveyed companies.

 

This was followed by Rznomics (29.6 times), Graphy (29.0 times), G2GBIO (28.1 times), and QuadMedicine (27.5 times).

 

Emerging-technology companies cannot set the public offering price on their own.

 

The estimated earnings and comparable companies are determined through consultation between the company and the listing underwriter, based on a comprehensive consideration of the listing applicant's technology and market outlook.

 

Furthermore, the final public offering price is confirmed only after a second step involving institutional investor demand forecasting, followed by applying a discount rate to the estimated earnings to determine the desired public offering price range.

 

However, the market assessment is that the public offering prices for biotech and healthcare companies are being set at an excessively unrealistic level.

 

Indeed, the majority of emerging-technology biotech companies fail to achieve the earnings estimates presented in the public offering price calculation.

 

Experts commonly point out that biotech companies, which lack visible earnings such as sales or profits, are more likely to overestimate their public offering price than conventional companies.