[At a Crossroads: Listed Company] JW Biotech's GMP Factory Establishment Fails... Causing Losses to the Company ⑤

[Asia Economy Reporter Jang Hyowon] SNPE Genetics, a subsidiary of KOSDAQ-listed company GW Biotech, issued convertible bonds (CB) worth 10 billion KRW and repaid them early within just three weeks. This occurred because the company suddenly announced it could not proceed with the planned establishment of a GMP (Good Manufacturing Practice) factory, which was the stated purpose for raising funds, prompting investors to request early repayment.

Until five days before the CB repayment, GW Biotech and SNPE Genetics had been heavily promoting plans to build a GMP-standard factory and enter the pharmaceutical contract manufacturing organization (CMO) business. However, they quickly reversed their stance, causing confusion among investors. Moreover, the company incurred losses by paying an additional 500 million KRW to bondholders as a "performance guarantee deposit" upon CB repayment.

According to the Financial Supervisory Service's electronic disclosure on the 15th, SNPE Genetics acquired the third series CB worth 10 billion KRW before maturity due to bondholders' early repayment requests. The third series CB was issued on the 17th of last month and was repaid just three weeks after issuance.

The reason for repayment was that SNPE Genetics could no longer use the funds as intended at issuance. The company had stated that the CB proceeds would be used exclusively to purchase a factory equipped with GMP facilities and ancillary equipment capable of pharmaceutical contract manufacturing.

The CB included a put option allowing bondholders to demand early repayment if it became clear that SNPE Genetics could not use the funds as specified.

SNPE Genetics explained, "Our pharmaceutical production policy changed from directly producing by purchasing a factory to producing under manufacturing consignment contracts, which led bondholders to request early repayment."

Previously, GW Biotech, the largest shareholder of SNPE Genetics, had announced through media interviews that it was securing land for a GMP factory and planned to complete construction in the fourth quarter of this year after issuing the third series CB.

Specifically, they revealed a vision to enter the CMO business through SNPE Genetics by acquiring approximately 4,300 pyeong (about 14,200 square meters) of land in Osong Life Science Complex Phase 2 and establishing a mass production system for vaccines and pharmaceuticals.

Additionally, on the 2nd of this month, GW Biotech and SNPE Genetics stated in promotional materials, "To advance the CMO business, we have established the first campus in Dongtan, Gyeonggi Province, for non-clinical and clinical sample manufacturing, and plan to build a second campus with a GMP factory and facilities on approximately 4,000 pyeong in Osong Life Science Complex Phase 2 by 2024, aiming to develop independent CMO production capabilities for vaccines and pharmaceuticals."

Despite such extensive promotion, the company repaid the CB early just five days later, citing difficulties in establishing the GMP factory. The company did not disclose the change in pharmaceutical production policy in its promotional materials. This situation could result in losses for individual investors who invested based solely on previously released information.

Furthermore, SNPE Genetics paid an additional 500 million KRW to CB bondholders, acquiring the third series CB worth 10 billion KRW for 10.5 billion KRW. Bondholders thus earned a 5% profit in just three weeks. SNPE Genetics stated that the 500 million KRW was paid as a performance guarantee deposit and, according to the contract, this amount belonged to the bondholders.

The bondholder is a company called "Callis BNT," established last year with a capital of 1 million KRW. It is known to possess technology capable of treating livestock manure from cattle and pigs using microorganisms. Gong Hyungcheol, an inside director of this company, was a managing director at Asia Pacific Investment and is the CEO of Entity Global.

Meanwhile, inquiries to GW Biotech regarding this matter went unanswered.