[Asia Economy Reporter Lim Jeong-su] L&C Bio, a KOSDAQ bio company specializing in the processing and sales of human tissue grafts (acellular allogeneic dermis), is raising 15 billion KRW in funds. The funds will be used for expansion into the Chinese market.
According to the investment banking (IB) industry on the 3rd, L&C Bio plans to issue equity-type bonds including convertible bonds (CB) and bonds with warrants (BW) worth 15 billion KRW. Pureun Partners Asset Management and Kiwoom Capital have formed a new technology business investment association worth 16.5 billion KRW composed of multiple institutional investors, which will acquire the CB and BW issued by L&C Bio.
There is no early redemption right (call option) held by the issuer. Therefore, investors must realize profits by either selling the CB and BW as a whole or converting them into shares and then selling them on the market. Essentially, this is an investment betting on the rise of L&C Bio’s stock price.
The stock price has surged more than twofold since the beginning of this year. Recently, the upward trend has paused, fluctuating around 50,000 KRW per share. This is about a 100% increase from the initial public offering price of 24,000 KRW set when the company was listed on KOSDAQ in November 2018, underwritten by Korea Investment & Securities and DB Financial Investment.
Currently, the investor recruitment is reportedly progressing smoothly. The general partners (GPs), Kiwoom Capital and Pureun Partners Asset Management, are contributing some funds. Banks, securities firms, hedge funds, and capital companies have either confirmed or are reviewing investments ranging from 1 billion to 3 billion KRW.
L&C Bio was established in 2011 and has been growing rapidly. The company imports allogeneic dermis donated by deceased donors, processes it into dermal products for transplantation to burn and plastic surgery patients, and sells these products to hospitals. Sales, which were only around 5 billion KRW in 2014, increased to 29 billion KRW last year. Operating profit also surged from about 35 million KRW to 9 billion KRW during the same period.
Currently, clinical trials are underway to commercialize cartilage treatments and ECM fillers made from processed allogeneic dermis. The domestic market size for these two new pipelines is expected to reach 30 trillion KRW.
L&C Bio plans to invest the raised funds into its expansion into China. The company is seeking to enter the Chinese market by establishing a joint venture (JV) with a leading Chinese partner. The strategy is to supply allogeneic dermis to burn and plastic surgery patients in China as a stepping stone for a new leap forward.
An IB industry official stated, "If the expansion into China is successful, sales and profits are expected to increase significantly."
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