[Gi-ro-ui Sangjangsa] Synergy Innovation① Surge in CB Conversions at Upper Limit

Stock Price Hits Upper Limit on Subsidiary's Major Technology Export News
CB Investors Rush to File Conversion Requests After Period of Inactivity

Synergy Innovation, a KOSDAQ-listed company, has seen a surge in conversion requests from convertible bond (CB) investors following the record-high stock price triggered by its subsidiary Neurobiogen's large-scale technology export deal. Although these CBs have been convertible since last year, conversion requests had not been made due to Synergy Innovation's sluggish stock price.

According to the Financial Supervisory Service's electronic disclosure system on the 18th, Synergy Innovation announced on the 16th that conversion requests worth 11.6 billion KRW had been made for the 14th series of convertible bonds. The newly issued shares upon conversion amount to 4,141,950 shares, representing 5% of Synergy Innovation's total issued shares.

These CBs were issued on December 22, 2023, totaling 39 billion KRW. The purpose of the fundraising was 30 billion KRW for acquiring securities of other companies and 9 billion KRW for other funds. The issuance targets were financial institutions. Synergy Innovation has used 23.5 billion KRW of the CB funds for acquiring other companies and has kept the remainder with financial institutions.

After issuing the CBs, Synergy Innovation incorporated 'Neurobiogen' as a subsidiary. It converted 3 billion KRW worth of Neurobiogen CBs it previously held into shares, securing a 55.6% stake. Neurobiogen is a drug development specialist company possessing the oral treatment 'Tisolarigilin (KDS2010)' for obesity and Alzheimer's dementia. Tisolarigilin has completed Phase 1 clinical trials domestically and is currently preparing for Phase 2 trials.

Neurobiogen announced the day before that it had signed a technology export contract worth 6.5 trillion KRW with a U.S. pharmaceutical company. The deal involves transferring global licenses for the development and commercialization of Tisolarigilin to the U.S. pharmaceutical company, receiving upfront payments, milestone payments (stage-based royalties), and sales royalties.

Following this news, Synergy Innovation's stock price hit the upper limit. It surpassed the 4,000 KRW mark for the first time in 1 year and 7 months since September 2023, reaching its highest point. The previous day, it also surged 14% intraday, marking over a 50% increase in just two trading days.

As the stock price rose, Synergy Innovation's CB investors quickly filed conversion requests. The conversion price for these CBs is 2,799 KRW. Although convertible into shares since December last year, conversion requests had not been made due to the stagnant stock price. Had the stock price remained depressed, investors could have exercised early redemption requests (put options).

From Synergy Innovation's perspective, the stock price increase is welcome. If the put option for the 39 billion KRW CB had been exercised, the company would have had to take measures such as selling investment assets. As of the end of last year, Synergy Innovation's cash equivalents amounted to 9 billion KRW, and other liquid financial assets totaled 22.3 billion KRW.

A Synergy Innovation official stated, "For the 14th series CB, conversion requests were made by some investors as the stock price exceeded the conversion price from mid-January to the end of February this year." He added, "There are still trading days left until the listing of new shares from this CB conversion request, so the recent sharp rise did not trigger the conversion requests." He further noted, "The put option period also starts from December, so there was still plenty of time."

Meanwhile, the scheduled listing date for the new shares from the current conversion request is the 30th of this month. Additionally, the remaining unconverted amount is approximately 27.4 billion KRW, with 9,777,296 shares (11.8%) potentially being released further.