The pharmaceutical and biotech industries are stepping up efforts to restore shareholder confidence and enhance corporate value, with companies increasingly pursuing share buybacks and cancellations of treasury shares. As more executives directly purchase company shares and companies undertake share buybacks and cancellations, the industry is strengthening its commitment to responsible management.
Shareholder-friendly policies are being viewed as a meaningful signal. However, some analysts point out that sustained increases in corporate value ultimately require support from stronger earnings and R&D performance.
According to industry sources on Aug. 6, a growing number of listed pharmaceutical and biotech companies, including Kolon TissueGene, HuMediX, NGeneBio and Dongkoo Bio&Pharma, have recently decided to buy back their own shares. Most cited stock price stabilization, enhancing shareholder value and demonstrating responsible management as the main reasons for the moves.
Executives are also increasingly purchasing shares of their own companies on the open market. At Kolon TissueGene, co-CEO Jeon Seung-ho and CFO Kim Jung-in purchased company shares after the stock price fell sharply following the release of U.S. clinical results for TG-C, a cell and gene therapy for knee osteoarthritis.
Lee Kyu-ho, vice chairman of Kolon Group, subsequently purchased Kolon TissueGene Korean Depositary Receipts (KDRs) for the first time, signaling his commitment to responsible management to the market.
HuMediX and HuM&C also decided to buy back shares worth $3.3 million and $667,000, respectively. The companies said the measures were intended to raise their undervalued corporate valuations and strengthen long-term trust with shareholders.
HuMediX has also outlined plans to expand quarterly dividends as part of efforts to strengthen its shareholder-return policies, while HuM&C followed its first cash dividend since its founding with a share buyback. Kim Yong-joo, founder and chairman of LigaChem Biosciences (141080), also recently purchased approximately $1 million worth of company shares on the open market.
NGeneBio CEO Kim Min-sik also purchased approximately $67,000 worth of company shares for the first time since taking office. The company said the decision was intended to demonstrate management’s confidence in improving earnings and the growth potential of its core businesses.
HLB, meanwhile, saw its stock price plunge after the U.S. Food and Drug Administration rejected its liver cancer drug application for the third time. Chairman Jin Yang-gon subsequently purchased shares in affiliates including HLB Therapeutics, HLB Genex and HLB Panagin.
More recently, companies have moved beyond share buybacks to treasury share cancellations. Following amendments to the Commercial Act in March that introduced requirements for companies to dispose of or cancel treasury shares within a certain period, companies are responding to both the shareholder-return benefits and regulatory changes.
Hanmi Pharmaceutical decided to cancel approximately $2.7 million worth of treasury shares, while Yuhan Corp. decided to cancel all of its treasury shares, valued at approximately $2.8 billion. Celltrion also completed the cancellation of approximately $667 million worth of treasury shares this year and announced plans for additional cancellations, continuing its shareholder-return policies.
Some companies are also expanding employee compensation programs using treasury shares. Hanmi Pharmaceutical and SK Bioscience (302440), among others, operate stock-based performance compensation programs such as restricted stock awards (RSAs) and restricted stock units (RSUs), pursuing long-term increases in corporate value while also motivating employees.
The moves are being viewed as strategies designed to address changes to the Commercial Act while pursuing both the justification and practical benefits of enhancing corporate value.
Industry observers say recent share buybacks by pharmaceutical and biotech companies carry symbolic significance beyond simply supporting stock prices, as they communicate companies’ growth potential and commitment to responsible management to the market.
However, analysts also say that investor sentiment can recover over the long term only when companies’ fundamental competitiveness is supported by clinical successes, licensing deals and improved earnings.
As seen in the cases of Kolon TissueGene and HLB, when adverse developments occur in core businesses, such as clinical failures or delays in FDA approvals, stock prices may recover slowly even after executives purchase company shares.
Conversely, companies that demonstrate growth momentum through licensing deals or clinical achievements appear to see relatively greater effects from share buybacks.
An industry official said, “Recent share buybacks and cancellations in the pharmaceutical and biotech industries are representative examples of stronger shareholder-return policies and responsible management,” adding, “Ultimately, these measures will translate into higher corporate value only when they are accompanied by R&D achievements and improved earnings.”