[Funding] Genexine, Korea Investment & Securities Sets Limit on Remaining Stock Acquisition

Raising 100 Billion KRW Through Rights Offering
Major Shareholder to Acquire 75% of Allocated Shares... Worth 11.3 Billion KRW

[Asia Economy Reporter Hyungsoo Park] Genexine is planning a large-scale fundraising through a rights offering. As investor sentiment in the domestic stock market has frozen, uncertainty over the fundraising plan has increased. The lead manager, Korea Investment & Securities, has signed a standby underwriting agreement, and if there are remaining shares, the commission size may increase.

According to the Financial Supervisory Service's electronic disclosure system on the 29th, Genexine will raise 100 billion KRW through a rights offering followed by a general public offering of unsubscribed shares. It will issue 5.8 million new shares by allocating 0.23 new shares per one existing share. The planned issue price is 17,250 KRW, and the issue price will be finalized on November 30.

Of the funds raised through the rights offering, 34.7 billion KRW will be used for the domestic Phase 3 clinical trial costs of the cervical cancer therapeutic vaccine (GX-188E) that Genexine is researching. Additionally, 27.5 billion KRW has been allocated for clinical trial costs of the sustained-release anemia treatment (GX-E4) and triple-negative breast cancer immuno-oncology drug (GX-I7). The remaining funds will be used for process development and research and development costs for commercialization.

Genexine recorded operating losses of 39.2 billion KRW in 2020, 19.4 billion KRW in 2021, and 11.9 billion KRW in the first half of this year. This is the result of continuous investment in research and development for new drug development. As of the end of the first half of this year, the company recorded a total debt dependency ratio of 14.3%, a debt ratio of 25.8%, and a current ratio of 174.6%.

Earlier, Genexine withdrew from the COVID-19 preventive DNA vaccine business in March. It judged that demand for new vaccines decreased as the world entered the endemic era. Since then, combined with the sluggish domestic stock market, Genexine's stock price has fallen by about 50% over six months.

Genexine signed a standby underwriting agreement with the lead manager Korea Investment & Securities to prepare for a shortfall in the rights offering subscription. However, Korea Investment & Securities set a limit on the number of shares it is obligated to underwrite. For underwriting remaining shares, it will receive a 9% commission based on the underwriting scale. With the recent sharp decline in the KOSDAQ index, the possibility of a large number of remaining shares after the general public offering cannot be ruled out. It appears to be a minimum safety measure.

Handok, the largest shareholder of Genexine, will subscribe to about 75% of the allocated new shares. The number of shares to be subscribed is 653,777 shares, and the subscription funds are expected to reach about 11.3 billion KRW.

Korea Investment & Securities analyzed that, due to the characteristics of bio companies, the possibility of additional fundraising in the future cannot be excluded, and repeated issuance of stock-related bonds and rights offerings may damage shareholder value.

A Genexine official said, "The securities registration statement includes an expression that the number of shares obligated to be underwritten is limited to the amount specified in the underwriting agreement," and added, "If there are remaining shares after the general public offering, Korea Investment & Securities will underwrite them."