About 80 percent of companies listed on the Kosdaq stock market using the regulator’s “technology exception policy” was in the biotech industry. Still, only six firms turned from red to black last year, a lawmaker found.

A couple of companies are under the suspicion that their executives and affiliated people used insider information to increase their wealth, he said, calling for the regulator’s special monitoring.

According to data from the Financial Services Commission and the Korea Exchange submitted to Rep. Sung Il-jong of the main opposition Liberty Korea Party, 76 companies have benefited from preferential Kosdaq listing since the regulator introduced the tech-preferential policy in 2005.

Sixty-one, or 80 percent, of them were biotech firms. After Helixmith (formerly ViroMed) used the policy for the first time in 2005, many other biotech companies have resorted to the policy to raise funds for initial public offering. The purpose of the technology exception policy is to help a company with recognizable technological advancement raise funds through going public.

A majority of the biotech companies have failed to achieve meaningful results and still suffer losses, however. Among the 61 biotech firms, only six made profits, and three developed new drugs successfully last year.

Some companies came under fire for suspicions that their executives took advantage of undisclosed information to gain unwholesome profits. Recent news reports cited SillaJen and Helixmith executives selling their stocks before the companies disclosed in public filings that they failed their clinical trials on candidate drugs.

An executive at SillaJen suddenly sold all of his common stocks, just before the company unveiled the result of the futility analysis on Pexa-Vec, an oncolytic virus against liver cancer. After SillaJen’s IPO, CEO Moon Eun-sang, executives, and affiliated persons have sold their shares worth over 200 billion won. In August, the prosecution raided SillaJen for allegedly using undisclosed information.

Observers raised a similar suspicion against Helixmith. Some of its affiliated persons sold off shares just before the company disclosed publicly that it failed to conclude a phase 3 clinical trial due to a mix between the placebo and treatment groups.

The company said it was only a coincidence that the stocks were sold before the disclosure, but the suspicion did not abate easily.

Rep. Sung said as much as the regulator provides benefits for companies listed under technology exception, it needs special monitoring on them to protect investors.

“Companies listed under the technology exception policy should not file public disclosure sparsely only when some events occur but regularly file announcements so that minority investors can check information frequently,” he said.

As the largest shareholders frequently sell their shares using insider information after the short lock-up period, the regulator needs to designate a separate lock-up period for these companies, he added.

During a lock-up period, company executives and owners are restricted from selling their stocks.

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