[Alpha Biz= Paul Lee] Biotech company Alteogen has been embroiled in a royalty controversy after it emerged that the royalty rate under its licensing agreement with U.S. pharmaceutical giant Merck was significantly lower than market expectations.

Royalties—payments linked to drug sales after commercialization—were widely expected by the securities industry to amount to 4–5% of sales. However, disclosures revealed that Alteogen’s actual royalty rate is just 2% of net sales, roughly half of what the market had anticipated.

Following the revelation, Alteogen’s share price plunged. While disappointment over the lower royalty rate was the primary trigger, the decline was also attributed to erosion of investor trust in the company. Despite persistent market assumptions of a 4–5% royalty rate used by brokerage firms in valuation models, Alteogen neither corrected nor clarified these expectations. The company also failed to disclose the royalty details in its quarterly or event-driven filings.

In contrast, Merck—Alteogen’s contractual counterparty—explicitly disclosed the royalty terms in its Form 10-Q for the third quarter of last year, stating that “a 2% royalty on net sales is payable to Alteogen.”

This discrepancy has fueled sharp criticism from investors. Some argue that if Alteogen knowingly allowed inflated expectations to persist, it amounts to misleading investors, while others contend that if the company was unaware of Merck’s disclosure, it reflects incompetence within its IR team. Given that several brokerage firms calculated valuations based on a 5% royalty assumption, critics say at least minimal communication was warranted.

Alteogen’s official statement appears to align more closely with the former criticism. The company said it confirmed in November, when Merck filed its third-quarter report, that royalties were included in the disclosure, and that it has since been in discussions with Merck regarding the circumstances of the disclosure and potential follow-up measures.

This acknowledgment implies that Alteogen was aware of the disclosed royalty rate yet remained silent for more than two months, a point that has further intensified scrutiny over its disclosure practices and investor communications.

 

 

 

[ⓒ 알파경제. 무단전재-재배포 금지]