South Korea’s financial authorities have embarked on an extensive investigation on Hanmi Pharmaceutical Co. on whether the delayed announcement of the termination in an exclusive partnership agreement on lung cancer treatment drug with Boehringer Ingelheim had been intentional and whether employees have profited in any way through the access of the insider information.

The Korean drug maker last Thursday said it inked an exclusive development and license agreement with Genentech on anti-cancer treatment HM95573, but on the following morning it released a statement that its exclusive license of Olmutinib (HM61713), a lung cancer treatment candidate, signed a year ago was returned from Boehringer Ingelheim. The firm’s shares started off strong at 649,000 won ($587.81) on Friday morning on the new out-licensing deal but plunged 18.06 percent to close at 508,000 won after it admitted to the fallout in the previous blockbuster deal.

The Korea Exchange will investigate into the suspicions of insider trading and illicit gains and whether there had been any illegalities throughout the process. The entire employees as well as anyone who could have had access to the information in advance would come under scrutiny.

The investigation results will be handed over for further review by the Financial Supervisory Commission (FSC), said an unnamed Korea Exchange official on Monday.

It would likely take about two weeks for the securities commission to probe the affair, and possibly more if the investigation stretches to offshore investors.

The securities commission will probe why the company withheld the information about the cancellation of the contract with German partner for 14 hours before making the disclosure. It will investigate whether the company’s action played any part in triggering shorting selling offers of 104,327 in Hanmi shares on Friday, the largest volume since they have been publicly traded. Usually, short-sale position in Hanmi stock averaged 4,850 shares a day.

Authorities suspect some parties would have gained from insider trade or access to the information prior to the formal release. The fact that the company disclosed the termination in the contract after the market opened may have given a certain group of investors time to dump their shares to make profit.

“We would be looking into a wide range of irregularities - abuse of insider information, distortion of the market order, price manipulation and other illicit scheming,” said an official of the stock market authority.

Hanmi Pharmaceutical also would come under scrutiny for any violation with the disclosure rules.

As of 1:50 p.m., Hanmi Pharmaceutical shares fell 40,000 won or 7.87 percent to 468,000 won from the previous session.

By Park Yun-gu

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