Thu, Apr 14, 2016 - Page 13 News List

Lawmakers slam FSC’s handling of OBI Pharma case

By Ted Chen  /  Staff reporter

Lawmakers on the legislature’s Finance Committee yesterday said they are unhappy with the Financial Supervisory Commission’s reluctance to shed light on information related to recent controversies surrounding biotechnology company OBI Pharma Inc (台灣浩鼎).

At a closed-door meeting with the commission officials, lawmakers across party lines demanded to know the identities of investors and institutions who had sold short on OBI shares to take advantage of bearish bets, but to no avail.

Chinese Nationalist Party (KMT) Legislator William Tseng (曾銘宗), the former commission chairman, had listed the identities of beneficial owners of two offshore entities found among OBI Pharma’s top 10 stakeholders, as well as investors and institutions involved in a spike in short interest in the company as prospects turned sour.

However, the commission said that it cannot provide details as prosecutors have launched investigations into alleged market manipulation and insider trading.

“The case remains murky without these key facts,” KMT Legislator Lai Shyh-bao (賴士葆) said.

Lai said the commission acknowledged that more than 4 million OBI Pharma shares were loaned to investors and institutions for short bets, with interest fees averaging between 7 percent and 12 percent, but that it refused to provide further details.

Lawmakers vowed to form a “document request committee” to obtain the facts they need.

OBI Pharma’s share price has gone through a precipitous tumble after the company announced discouraging results from a clinical trial for a new breast cancer vaccine on Feb. 21.

As the stock’s price tanked, allegations arose that a number of company executives and interested parties had profited by acting on non-public information, selling part of their holdings ahead of announcements that the drug’s third-phase clinical trials had shown “no statistical significance.”

The Chinese-language Next Magazine yesterday reported that prosecutors are looking into a number of institutions and active traders who borrowed NT$2.2 billion (US$68.01 million) worth of OBI shares for short sales. Many of the shares were loaned at exceedingly low interest rates of 0.01 percent, the report said, suggesting that the short sales were planned by the company’s major stakeholders.

The report also accused Academia Sinica President Wong Chi-huey (翁啟惠), a close collaborator with the company, and OBI chairman Michael Chang (張念慈) of market manipulation.

Wong and Chang had publicly supported the company’s prospects in a bid to calm panicked retail investors to ensure maximum profits for short sellers, the report said.

Wong, who is currently on leave in the US, said in a statement released on Thursday last week that he sold 10,000 of his daughter’s OBI shares on her behalf on Feb. 18, on the advice of a stockbroker.

Lawmakers have demanded Wong return to Taiwan to explain his daughter’s OBI shareholding and how she sold shares just before prices tanked.

The commission said it is revising regulatory guidelines on biotechnology stocks to expand stock trading restrictions imposed on company insiders and raise awareness of risks associated with the sector’s make-or-break nature, where companies do not produce steady revenue streams leading up to the successful commercialization of new drugs.

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