Blurry boundaries of investing and gambling

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Blurry boundaries of investing and gambling

The author is an S Team reporter of the JoongAng Ilbo.

Bio feeds on dreams, some say. Sillajen is the company that suits this saying. Its vision to “treat terminal cancer” made hearts pound. As the course of developing anticancer virus substance Pexa-Vec went smoothly, the company grew in size after acquiring U.S. bio venture Jennerex, which was conducting clinical trials together.

What shocked the market was the news of the approval of Phase 3 clinical trials for Pexa-Vec in April 2015. Sillajen, which emerged as a star in the over-the-counter market, chose to go public to challenge the Phase 3 clinical trials which required astronomical costs. In December 2016, Sillajen made a spectacular debut on Kosdaq. Its stock price jumped tenfold in less than a year. The anticipation for a blockbuster anticancer drug and dreams of individual investors sparked a bio-investment craze in Korea.

Things began to crack in 2018. After the largest shareholder family suddenly sold their stocks at the beginning of the year, rumors spread of its clinical failure. In August 2019, the worst news broke out. The U.S. Data Monitoring Committee (DMC) recommended suspending the clinical trial of Pexa-Vec.

The rumor turned out to be true. The stock price hit the lower limits three days in a row. The nightmare did not stop there. The prosecution’s raid of the company followed by arrests of the former CEO and advisor. In May 2019, trade was suspended.

After a nightmarish two years and five months, the Korea Stock Exchange finally decided to resume trading of Sillajen stocks on Oct. 12. What’s surprising was its performance after returning. After trading resumed, it hit the upper limits for two consecutive days primarily due to the change of the largest shareholder and the lock-up period the company voluntarily set to show responsible management.

The company also reinforced the pipeline and secured sufficient funding. Sillajen pledged to focus on research and development and to do its best to enhance its corporate value. I really hope it will.

What is more important is the attitude of investors. Once trading has resumed, overheating is observed again. But there is no middle ground in developing new drugs. It is either a success or a failure.

Phase 2 clinical trials of Pexa-Vec are in progress, followed by a clinical trial for another potential anticancer substance, BAL0891, which will begin trials by the end of the year at the earliest. Investing in Sillajen is still risky, and investors should be prepared for a long battle with a low possibility.

At least in this industry, “this will work for sure” and “it is certain this time” should not be used or trusted. The line between investment and gambling is always blurry.
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