[At a Crossroads] DT&CRO ④ Fails to Pay Partners... 'Going Concern Uncertainty' Risk Emerges

Unpaid 1.4 Billion Won in Clinical Trial Service Fees Leads to Provisional Seizure of Headquarters and Research Center
Auditors Raise “Material Uncertainty About Going Concern” Amid Continued Losses

KOSDAQ-listed DT&CRO is facing a severe management crisis as it has been subjected to asset provisional seizure by a major partner hospital amid a liquidity crunch. Observers point out that the company's core business foundation is starting to shake, as it has failed to pay its main partners on time.

According to the Financial Supervisory Service's electronic disclosure system on October 2, Seoul Hyochun Medical Foundation, which operates H Plus Yangji Hospital, recently filed for and received court approval for a provisional seizure of key real estate assets, including the research center and headquarters owned by DT&CRO in Yongin, Gyeonggi Province.

The claim amount totals 1.4 billion won, representing unpaid clinical trial service fees owed by DT&CRO to the hospital. This sum is equivalent to 90% of DT&CRO's cash and cash equivalents as of the end of the first half of this year.

Previously, Seoul Hyochun Medical Foundation had also secured a provisional seizure of DT&CRO's primary corporate bank account in addition to its real estate assets. When a company's bank account is provisionally seized, not only is it unable to pay salaries, but all essential funds for daily operations are frozen, potentially pushing even profitable companies to the brink of insolvency. Currently, the seizure on the account has barely been lifted.

The market is taking a grave view of the conflict between DT&CRO and Seoul Hyochun Medical Foundation. DT&CRO is a contract research organization that receives and manages outsourcing contracts from pharmaceutical companies, such as new drug development and bioequivalence studies.

H Plus Yangji Hospital, operated by Seoul Hyochun Medical Foundation, possesses one of the country’s top-tier clinical trial centers and conducts dosing and testing on healthy adults as well as patients. Thus, it is considered DT&CRO's key business partner. The fact that DT&CRO, as the contract research organization overseeing clinical trials, was unable to pay its service fees to such a partner is seen as a signal that its business model is no longer functioning properly.

Industry officials are most seriously concerned about the potential “loss of trust” in DT&CRO resulting from this crisis. Worry over nonpayment may spread among other cooperating hospitals and outsourced vendors, and this is likely to have a direct, negative impact on the company’s ability to win new clinical research projects from pharmaceutical clients in the future.

Given its current financial position, analysts suggest that it will be difficult for DT&CRO to lift the provisional seizure by making payments in the short term. As of the end of the first half, DT&CRO held only 1.5 billion won in cash and cash equivalents, with immediate liquidity stretched thin due to ongoing operating losses. Furthermore, its operating cash flow remains negative, indicating that the company's own ability to generate cash has virtually dried up.

To make matters worse, deteriorating financial indicators have prompted warnings from external auditors. During the recent review of its semiannual financial statements, DT&CRO was flagged by its auditing firm for “material uncertainty about the company’s ability to continue as a going concern” due to substantial accumulated operating losses and excess current liabilities. This raises serious doubts about the company’s ability to settle its debts and recover assets through ordinary business operations.

Multiple attempts were made to reach DT&CRO for comment on these matters, but the company declined to respond.

This content was produced with the assistance of AI translation services.