Recently, news about the development of vaccines for the novel coronavirus infection (COVID-19) has been emerging from various places. American pharmaceutical companies Pfizer and Moderna announced that their respective COVID-19 vaccines showed 95% immune efficacy in Phase 3 clinical trials. This news excited people worldwide who were exhausted by COVID-19. Expectations grew that the world could return to the pre-COVID-19 pandemic era. These expectations were also reflected in the stock market. Global stock markets have continued to rise daily, buoyed by prospects of economic recovery. In the domestic stock market, especially, the stock prices of companies grouped as Pfizer and Moderna-related stocks surged sharply. The reasons these companies are grouped as related stocks vary. Some seem reasonable, but others are somewhat questionable. Accordingly, Asia Economy conducted an in-depth analysis of KPX Life Science, ABPro Bio, and Somagen, which are among the 'COVID-19 vaccine-related' companies recently attracting attention in the domestic stock market.
[Asia Economy Reporter Hyungsoo Park] As the COVID-19 vaccines being developed by global pharmaceutical companies Pfizer and Moderna are known to be highly effective, interest in the domestic KOSDAQ-listed company ABPro Bio has also increased. Since the vaccine development speed of overseas pharmaceutical companies is faster than that of many domestic pharmaceutical companies developing COVID-19 vaccines, there is great expectation that securing domestic sales rights will help improve performance. However, considering the social and economic damage caused by the COVID-19 pandemic, it is still premature to judge whether specific companies will benefit. Since the government is directly involved in vaccine procurement, there are many variables such as the timing of introduction, vaccine approval, and distribution prices.
ABPro Bio launched a new bio business after its largest shareholder changed last year. Veritas Investment Association participated in ABPro Bio’s third-party allotment paid-in capital increase in August last year, acquiring 22 million new shares (13.5% stake). Since then, some association members withdrew, reducing the shares held to 9.56 million (4.2%). As of the end of the third quarter, the largest shareholder and related parties hold a 10.4% stake.
◆ Focus on new bio business by recruiting MIT professor = Along with the change of the largest shareholder, ABPro Bio held an extraordinary general meeting and appointed Robert Langer, David H. Koch Institute Chair Professor at the Massachusetts Institute of Technology (MIT), Ian Chan, Chairman of ABPro Corporation, and Eugene Chan, CEO of ABPro Corporation, as inside directors.
The new management is focusing ABPro Bio’s resources on developing bispecific antibody immuno-oncology drugs. Their goal is to develop anticancer drugs with extended half-life of bispecific antibodies, so patients do not need frequent dosing and experience fewer side effects. ABPro Bio’s U.S. subsidiary, ABPro Corporation, is developing a COVID-19 treatment.
The news that world-renowned bio expert Professor Robert Langer is participating attracted attention at the time. Professor Langer has been directly or indirectly involved in founding biotech companies such as Moderna, BIND Therapeutics, Living Proof, and Transform.
◆ Rising stock price and increasing CB conversions = ABPro Bio granted stock options for 3.3 million shares upon recruiting Professor Langer. The exercise period is from October 11 next year to October 10, 2024. The exercise price is 1,380 KRW, and the current stock price is 2,515 KRW. Thanks to Professor Langer, ABPro Bio’s stock price, linked to Moderna-related stocks, has risen 210% this month.
As the stock price surged, the exercise of conversion rights has also increased. In October last year, ABPro Bio issued 14th series convertible bonds worth 14 billion KRW to Meritz Securities. The conversion price at issuance was 1,290 KRW, and it can be adjusted down to the face value. ABPro Bio can exercise a call option on 50% of the convertible bonds. The funds raised were used to acquire shares in ABPro Bio International, a bispecific antibody new drug developer.
As holders of the 14th series convertible bonds have been exercising their conversion rights one after another, the outstanding unconverted bonds have decreased to 3.6 billion KRW. The conversion price is 593 KRW, expected to yield 3 to 4 times profit compared to the principal. While convertible bond holders can gain huge capital gains, shareholder value dilution is inevitable due to the sharp increase in the number of issued shares.
ABPro Bio recorded cumulative sales of 31.4 billion KRW and an operating loss of 6.1 billion KRW through the third quarter. Sales increased by about 10% compared to the same period last year, and the operating loss decreased. The debt ratio at the end of the third quarter was 13.8%.
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