Funding Continues Amid Bio Industry Boom

Shinrajen and HLB Life Science Issue New Shares for Fundraising
To Be Used for Clinical Trials and Debt Repayment... Risk Factors Need to Be Identified
Several Listed Companies Likely to Raise Funds Through Stock Prices

Investor sentiment toward the bio sector is reviving in the domestic stock market. Among the top five stocks with the highest growth rates this month, four companies?Aprogen, HLB Pharmaceutical, Samchundang Pharmaceutical, and HLB Therapeutics?are bio-related stocks. As funds flow into the bio sector, which experienced a downturn last year, Aprogen Biologics, SillaJen, and HLB Life Science are issuing new shares to raise operating capital.

According to the Financial Supervisory Service on the 27th, SillaJen will issue 34.5 million new shares through a rights offering followed by a general public offering of unsubscribed shares. The planned issue price per share is 3,750 KRW, raising a total of 129.3 billion KRW. New shares will be allocated at a ratio of 0.336 shares per existing share.

The raised funds will be used for research and development (R&D) and clinical trials of key pipelines. Some of the funds will be invested in SillaJen Bio, located in San Francisco, USA. SillaJen Bio is responsible for managing drug production for clinical trials, production process management, clinical drug supply, storage and distribution management (Supply), and conducting global clinical trials for its major pipelines within the United States.

Over the past five years, SillaJen has raised 120 billion KRW through third-party allotment rights offerings and private placement convertible bonds (CBs). Due to the nature of new drug development, there is a high dependence on externally raised funds to continue clinical trials. As of the end of last year, on a consolidated basis, the company held 23.6 billion KRW in cash and cash equivalents. By raising funds while investor sentiment toward the bio sector is favorable, the company can focus on new drug development for the next three to four years. The company expects that liquidity risk will decrease if funds are raised as planned.

HLB Life Science is also issuing new shares through a rights offering followed by a general public offering of unsubscribed shares. It plans to raise 150 billion KRW by allocating 0.103 new shares per existing share. The planned issue price is 13,630 KRW, about 40% cheaper than the current stock price of 23,800 KRW. The lead underwriters are Korea Investment & Securities and KB Securities. If there are remaining shares after the general public offering, the underwriters will subscribe to them. The underwriting fee is set at 16.0%.

Some of the raised funds will be used for pipeline clinical costs and R&D investments, while some will be used to repay borrowings. On a consolidated basis, total borrowings increased from 144.5 billion KRW in 2022 to 165.2 billion KRW last year. The borrowing dependency rose from 35.1% to 39.0%. After the capital increase and repayment of borrowings, the borrowing dependency is expected to decrease to 15.8%.

HLB, the largest shareholder of HLB Life Science, will be allocated 2,027,184 new shares in the rights offering. It will subscribe to 50% of the allocated shares. After the capital increase, the shareholding ratio is expected to decrease by 0.86 percentage points to 17.55%.

Aprogen Biologics plans to raise 72.4 billion KRW by issuing new shares for operating funds and debt repayment. It has set a plan to introduce an auto-injector (AI) device to apply to clinical samples and commercial products of Humira biosimilars.

The total funds raised by the three companies through new share issuance exceed 350 billion KRW. The planned subscription dates are also concentrated in June. Subscriptions are taken from shareholders, and if unsubscribed shares occur, investors are recruited through a general public offering. The financial investment industry advises, "Bio-listed companies are increasingly raising funds by capitalizing on the influx of funds into the bio sector. Investors should carefully read the investment risk factors stated in the securities registration statement before deciding whether to invest." They added, "Although some listed companies have not yet decided on fundraising, many are expected to raise funds after their regular shareholders' meetings. When investing in bio-listed companies, it is also necessary to consider whether fundraising is needed."