[At a Crossroads: Listed Companies] Cellmat Therapeutics Faces Emergency as 35 Billion KRW Funding Delay Leads to Capital Erosion

[Asia Economy Reporter Jang Hyowon] The 35 billion KRW funding round that Cellma Therapeutics is pursuing is being delayed. Since Cellma Therapeutics recorded a large-scale loss in the first half of this year, there are concerns about capital erosion if it does not increase its capital or turn profitable within this year.

According to the Financial Supervisory Service's electronic disclosure on the 2nd, Cellma Therapeutics announced that the payment dates for two third-party allotment capital increases worth 3 billion KRW and 7 billion KRW, respectively, scheduled for last month, have been postponed to October 15 and 30. The 3 billion KRW was decided on July 2, and the 7 billion KRW on August 5.

The corporation that agreed to invest 3 billion KRW is YBH Global. YBH Global is a newly established corporation with a capital of 1 million KRW as of June 25. It is a company led by Chairman Yoon Byung-hak, who was appointed as chairman of Cellma Therapeutics in April. After deciding on the capital increase, Chairman Yoon stated, “I will devote my efforts to overall management through actual capital investment rather than as a professional manager.”

The corporation that agreed to pay 7 billion KRW is LCM Science. LCM Science was established in 2017 with a capital of 500 million KRW and distributes cosmetics and health supplements. Last year, it recorded sales of 283.1 million KRW, operating profit of 36.19 million KRW, and net profit of 15.5 million KRW.

Earlier, on the 28th, Cellma Therapeutics also postponed the payment date for convertible bonds (CB) worth 25 billion KRW to the 29th. These CBs were first announced on March 26 and have been delayed twice, including on June 30.

The CB issuance target is ‘KJ Investment Association.’ KJ Investment Association had planned to acquire 15 billion KRW worth of CBs from the KOSDAQ-listed company Paxnet last February but postponed payment three times and eventually withdrew from the acquisition.

Cellma Therapeutics is known to be promoting its bio business through funding. On the 10th of last month, Cellma Therapeutics announced that it would expand its pipeline, including treatments for COVID-19 and non-alcoholic steatohepatitis (NASH), using 10 billion KRW raised from LCM Science.

Additionally, on the 24th of last month, it announced that it signed a tripartite contract with the European clinical research organization (CRO) ‘OPIS’ and the domestic ‘Korea Institute of Drug Research’ for the global Phase 3 clinical trial of the COVID-19 treatment.

Cellma Therapeutics’ main business is gift certificate distribution and dental material distribution. As of the end of the first half on a consolidated basis, Cellma Therapeutics recorded sales of 3.6 billion KRW, operating loss of 3.8 billion KRW, and net loss of 7.7 billion KRW. 88% of sales come from gift certificate distribution. Cellma Therapeutics acquired ‘Ticketnara Yeongdeungpo Branch’ in September 2014 and operates the gift certificate distribution business through exclusive distribution contracts with Ticketnara and the Yeongdeungpo and Guro areas.

As of the end of the first half, Cellma Therapeutics’ total equity was 5.6 billion KRW. If the capital increase fails or losses similar to the first half are recorded in the second half, capital erosion may occur.

A Cellma Therapeutics official said, “It is understood that the party who agreed to the capital increase is having issues related to funding.”