[At a Crossroads] Shaperon Faces Deepening Capital Erosion...Will a 30 Billion KRW Rights Offering Provide a Breakthrough?

Capital Erosion Rate Surpasses 37% in First Half of the Year
Shaperon Moves to Raise Additional Funds After Just Over a Year

The capital erosion of Shaperon, a new drug development company, is increasing. This is attributed to the fact that since its listing on the KOSDAQ market in 2022, the company has not succeeded in out-licensing any of its pipelines, and the rights offering it pursued last year recorded a lower-than-expected subscription rate. As a result, Shaperon has decided to conduct another rights offering after just over a year.

According to the Financial Supervisory Service's electronic disclosure system on August 19, Shaperon has decided to carry out a rights offering for 30 billion KRW, with a general public offering of forfeited shares after allocation to existing shareholders. The planned issue price is 1,866 KRW per share, and each existing share will be allocated 0.534 new shares.

Shaperon is currently in a state of capital erosion. As of the end of the first half of this year, its separate capital totaled 9.5 billion KRW, which is less than its capital stock of 15.1 billion KRW. The capital erosion ratio stands at 37.1%. If this rights offering is successful, it is expected that the company will be able to resolve its capital erosion.

Shaperon's capital erosion began in earnest this year. As of the end of last year, Shaperon's total capital was 16 billion KRW, which was higher than its capital stock. However, in just the first half of this year, the company recorded a net loss of 6.4 billion KRW, depleting its capital and falling into capital erosion. If this trend continues, the company could fall into complete capital erosion by the first half of next year.

Shaperon is a biotech company developing new drugs such as the intravenous COVID-19 treatment 'NuSepin' and the atopic dermatitis treatment 'Nugel'. It entered the KOSDAQ market in 2022 through a technology special listing.

The cause of the capital erosion is accumulated deficits. Focusing on new drug development, Shaperon currently has no business generating revenue. On the other hand, it spends about 10 billion KRW annually on research and development, salaries, and service fees required for clinical trials, among other expenses. As a result, the company has recorded annual net losses of 10 to 15 billion KRW since its listing. This has led to an accumulated deficit of 123 billion KRW.

In order for revenue to be generated immediately, a technology transfer agreement related to new drug development must be concluded, but since its listing in 2022, Shaperon has not signed a single contract.

By the end of the first half of this year, Shaperon had signed a total of two technology transfer agreements. In March 2021, it signed a technology transfer agreement with Kukjeon Pharm for the exclusive domestic development rights of the oral dementia treatment 'NuCerin'. In April 2022, it signed a technology transfer agreement with Bridge Biotherapeutics for the oral candidate 'HY209' for idiopathic pulmonary fibrosis (IPF).

Among these, the contract with Bridge Biotherapeutics, which played a significant role in Shaperon's technology special listing on KOSDAQ, was terminated in 2024 due to an internal decision by Bridge Biotherapeutics. While Shaperon received a 2 billion KRW upfront payment, it will not receive the milestone payments totaling approximately 28 billion KRW that were tied to clinical and regulatory progress.

In June last year, Shaperon conducted a general public offering rights issue for 35 billion KRW, just 18 months after its listing. However, due to the cold response from the market, it was only able to raise 12.7 billion KRW. A Shaperon official stated, "Capital erosion has progressed due to clinical expenses for new drug pipelines," and added, "We are currently in negotiations with several global pharmaceutical companies regarding technology transfer, but we believe strategic patience is necessary for greater growth and more favorable terms."