[CB Crisis] Nivec Issues CB to Existing CB and BW Investors

Responding to Early Redemption of Existing Mezzanine Bonds Due to Stock Price Slump
Convincing Existing Investors with Improved Performance and Clinical Expectations
Issuing CB by Lowering Conversion Price and Raising Interest Rate

[Asia Economy Reporter Hyungsoo Park] Nivec has launched a large-scale fundraising effort to repay its debts. It is issuing the 8th series of convertible bonds (CB) targeting investors of previously issued convertible bonds and bonds with warrants (BW).

According to the Financial Supervisory Service's electronic disclosure system on the 22nd, Nivec will raise 25 billion KRW by issuing CBs to domestic institutional investors. The nominal interest rate is 0%, and the guaranteed yield at maturity is a quarterly compounded annual rate of 3.0%. The conversion price is 21,175 KRW per share, and conversion can begin from November 22 next year.

Most institutional investors who invested in CBs and BWs two years ago, including KB Securities, Mirae Asset Securities, Orion Asset Management, V One PE, and MJ Investment Advisory, are participating.

Previously, in December 2020, Nivec issued 10 billion KRW each of CBs and BWs. It raised 20 billion KRW to build a biologics factory and to conduct preclinical and clinical research and development.

Since raising funds, Nivec's sales have steadily increased. The supply of bone regeneration biomaterials, including 'OCS-B Collagen,' has increased, leading to improved performance. With the aging populations in major advanced countries increasing implant demand, Nivec is supplying biomaterials to the European market in cooperation with overseas implant companies such as Nobel Biocare and Straumann.

Nivec recorded cumulative sales of 16.5 billion KRW and operating profit of 2.4 billion KRW in the third quarter of this year. Sales increased by 64.1% compared to the same period last year, and operating profit turned positive. Starting next year, it plans to supply a new biomaterial called 'Pepticol EasyGraft' and expand production capacity of existing products, expecting further sales growth.

In July this year, Nivec received approval for Phase 1 clinical trials of its pulmonary fibrosis treatment (NP-201) in Australia. The dosing experiment began in September at CMAX Clinical Trial Center, a local clinical specialist institution. Through clinical trials, it plans to prove safety and use this as a stepping stone for technology export of a new mechanism fibrosis treatment.

Although sales are increasing and new drug development is progressing smoothly, the stock price is sluggish. The stock price has fallen compared to when funds were raised two years ago. It is below the CB conversion price and BW warrant subscription price of 28,547 KRW. If early redemption requests surge at once, liquidity problems may arise. As of the end of the third quarter, Nivec holds 23.9 billion KRW in cash and cash equivalents. While sales are increasing through biomaterial supply, clinical trial costs for new drug development are continuously incurred.

Nivec is developing various new drug pipelines including ▲ inflammatory bowel disease treatment (NIPEP-IBD), ▲ anticancer treatment (NIPEP-KRAS), and ▲ selective cell and tissue-penetrating drug delivery platform (NIPEP-TPP), in addition to the pulmonary fibrosis treatment.

Due to inflation concerns and interest rate hikes, the environment for fundraising remains difficult. Nivec raised funds by lowering the conversion price and increasing the interest rate for existing bondholders. It repaid existing debts and additionally secured 5 billion KRW for clinical costs.

A Nivec official explained, "Issuing CBs is a proactive response to the unstable financial market and a decision to expand clinical trials."