An alleged insider-trading case against OBI Pharma Inc has been in the news for weeks and is still far from being finalized, with TV talk shows and news reports taking advantage of the scandal to challenge the vested interests in the local biotech industry and in the nation’s political economy.
It is ironic that this allegation, and with it a call for the resignation of Academia Sinica President Wong Chi-huey (翁啟惠), comes at a time when president-elect Tsai Ing-wen’s (蔡英文) Democratic Progressive Party (DPP) government is touting the development of biotechnology and pharmaceutical industry as the cornerstone of economic growth.
Conspiracy theories abound, particularly among the ranks of the Chinese Nationalist Party (KMT), who see the OBI case as an perfect display of greed and corruption involving certain biotech investors, Tsai and her family.
These KMT members — who orchestrated an attempt to discredit Tsai over the Yu Chang Biologics Co investment case during her presidential campaign in 2012 — think that as long as they continue their mudslinging campaigns, no matter what the legal outcome, they can eventually damage the legitimacy of the new government under Tsai.
The DPP would not want a repeat of the Yu Chang case, which hurt Tsai and the party. For the DPP, Wong needs to explain how the OBI shares held by his daughter were sold days prior to the release of clinical trial data for a new breast cancer drug, and apologize for his remarks about the efficacy of OBI-822, despite discouraging test results.
Many investors — who either harbored unrealistic expectations about OBI or were amenable to risky investment and ignored red flags — have seen the losses add up as the company’s shares slumped in view of its failed OBI-822 clinical trials. OBI investors might accept the consequences of their high-risk investment, but they are unlikely to endure their losses if other investors had information about the clinical trial results and were able to sell OBI shares before they were announced.
For now, the Shihlin Prosecutors’ Office in Taipei has started looking into allegations of insider trading, after receiving all related materials from the Financial Supervisory Commission. As the public learns about the alleged OBI shares misconduct and the potential for conflicts of interest of company insiders to arise, it raises the question whether the case reflects a changing fortune in Taiwan’s biotech industry.
In the past couple of years, the government has encouraged biotech development as a way to transform the economy. Since the legislature passed the Biotech and New Pharmaceutical Development Act (生技新藥產業發展條例) in 2007, the government has launched the Hsinchu Biomedical Science Park, state-run venture capital firm TMF Management Co and the biotech-oriented Supra Integration and Incubation Center. In addition, more than 200 biotech-related companies have now raised funds from shareholders on the open market.
However, can such enthusiasm develop the industry into another trillion-New Taiwan dollar industry? Would it come under increased public scrutiny? Would biotech still have a chance to become a pillar of economic growth under Tsai’s policy framework? If a certain group of investors comprising business tycoons, scientists and stock market players have quiet control, would they manipulate biotech shares? Perhaps, but prosecutors need more evidence to prove it.
Whatever the result in the OBI case, strong volatility in biotech shares is likely to be a thing of the past to most people and a forgotten lesson for greedy investors. Even so, the regulator must take disciplinary action against those violating transparency in information disclosure and found guilty of insider trading — for the sake of protecting investors and ensuring the industry’s long-term development.
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