Oscotec, a pharmaceutical and biotechnology company listed on the KOSDAQ market, has decided to distribute performance bonuses tied to the licensing-out (LO) deal for cevidoplenib, which it has been developing since 12 years ago, to newly appointed directors as well. Observers note that it is unusual to decide to pay a performance bonus to an executive who joined less than a year ago.
According to pharmaceutical and biotechnology industry sources on the 12th, Oscotec decided at its board of directors meeting on September 21 to pay performance bonuses to internal directors in connection with the LO deal for cevidoplenib (SKI-O-703).
It was determined that the list of recipients includes Shin Dong-jun, newly appointed Chief Financial Officer (CFO) and Senior Executive Vice President, who had been with the company for 11 months as of the time the performance metrics were established. The company stated that while the payment has been decided, it has not yet been actually disbursed.
The matter of paying performance bonuses was handled by a compensation committee composed of Lee Sang-hyun, President and Chief Operating Officer, and independent directors Kim Kyu-sik and Lee Kyung-seop. It is known that the compensation committee indicated its stance that it would distribute performance bonuses to all internal directors, taking fairness into consideration.
Oscotec's board consists of seven members: Yoon Tae-young, President and Chief Research Officer; Lee Sang-hyun, President and Chief Operating Officer; Gwak Young-shin, Head of Research Institute; Shin Dong-jun, Senior Executive Vice President; Kang Jin-hyung, Internal Director (Chief Medical Officer); and independent directors Kim Kyu-sik and Lee Kyung-seop.
According to a key source close to the board of directors, Oscotec's management stated at the board meeting where the performance bonus payment was decided that among current registered directors, those who do not receive incentives might leave the company, and in such a case, it would actually be contrary to enhancing shareholder value.
However, it is reported that opinions were divided even among the directors regarding the payment of performance bonuses. This was because the matter involved compensating for the achievements of a new drug that took more than 10 years to reach an LO deal. The current performance bonus follows Oscotec's signing of an LO contract with Agios Pharmaceuticals on June 1 for cevidoplenib, a candidate therapeutic agent for rheumatoid arthritis.
Oscotec transferred the global exclusive license to Agios and received an upfront payment of $25 million (approximately 37.5 billion won). Twenty-five percent of the upfront payment was paid to its subsidiary Xenoscience. If commercialization is achieved through future clinical development, the company may receive up to $640 million (approximately 962 billion won) depending on sales targets.
The point where directors' opinions clashed was the payment of performance bonuses to newly appointed directors. The performance bonus that Senior Executive Vice President Shin is set to receive is estimated at around 70 million won.
Senior Executive Vice President Shin joined the company in July last year, and his tenure was 11 months at the time of the LO contract signing, which served as the basis for performance evaluation. It is reported that Shim Hye-seok, Senior Executive Director, who joined Oscotec in June last year around the same time, is set to receive a performance bonus of approximately 100 million won. Senior Executive Director Shim successfully concluded the LO contract even while cevidoplenib had failed twice in clinical trials.
A lawyer specializing in corporate criminal law stated, "The Seoul High Court ruled in August last year (Case No. 2024-3001) that paying performance bonuses to executives who do not meet the required conditions constitutes property damage to the company, and the court has also determined that directors who participated in board resolutions deciding on unjustified performance bonus payments are accomplices." The lawyer added, "I am concerned that the payment of a performance bonus to Senior Executive Vice President Shin Dong-jun could escalate into issues such as breach of trust by the board of directors."
In response, an Oscotec official said, "Executive compensation is determined through deliberation by the compensation committee within the board and board resolutions, within the compensation limits approved at the shareholders' meeting." The official added, "The specific content and amounts of individual resolutions are not subject to disclosure, making it difficult to confirm, and executive performance bonuses have not been paid."
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