TITLE:
Is the IPO of Bio Venture Companies Intended for R&D? Analysis Study on Listed Bio Venture Companies in Korea
AUTHORS:
Hayoon Kang
KEYWORDS:
IPO, Bio Venture Company, Research and Development Performance
JOURNAL NAME:
Open Journal of Business and Management,
Vol.12 No.5,
September
14,
2024
ABSTRACT: Bio venture companies establish a pipeline based on various studies related to the treatment and diagnosis of diseases and aim to commercialize products. Usually, it is understood that they strive for an initial public offering (IPO) with the primary purpose of raising capital for research and development (R&D). However, research on how IPO affects the R&D performance of bio venture companies is lacking. In this study, the R&D performance of bio venture companies in Korea was compared and analyzed for 2 years before and after IPO. Results show that patent applications did not change considerably during 2 years after IPO compared the number during 2 years before IPO in 24 bio venture companies listed from 2018 to 2021 in the Korean stock market. In addition, the cases of licensing in/out were not significantly changed in those companies for 2 years before and 2 years after IPO. The number of entering the next phase of clinical trials decreased substantially during the 2 years after IPO compared with the 2 years before IPO. Meanwhile, Korean bio venture companies were found to attract significant investment from financial investors (FIs) before the IPO, and the FIs recovered their investment immediately after the IPO. In the end, it seems that another main purpose of the IPO of Korean bio venture companies is to make an opportunity for the FIs to recover their investment rather than to secure funds for R&D investment. This study found that the IPO of Korean bio venture companies does not show the primary effects of IPO, such as effective financing of companies and provision of attractive investment opportunities to investors. These results provide sufficient evidence that new policies may be needed to address the possibility of the bio venture companies’ ill-timed IPO.