Dim outlook for Korean biotech firms’ rights offerings

South Korea’s bio and tech-heavy Kosdaq-listed Shaperon Inc. raised 12.7 billion won ($9.2 million) from its latest rights offering, selling only about half the planned amount amid concerns about the biotech industry and share value dilution.

Its unsuccessful new share sale rings alarm bells for upcoming rights offerings by other Korean biotech companies, stocks of which nosedived after announcing new share sale plans earlier this year.

According to Shaperon on Wednesday, it secured 12.7 billion won during the public subscription of its new issues on Monday and Tuesday, falling far below its revised offer of 23.7 billion won in a 0.8:1 competition ratio. The institutional offer was said to have met even weaker demand.

The biotech firm’s tepid rights offering subscription was somewhat anticipated as its largest shareholder and Chief Executive Officer Seong Seung-yong did not participate, while other major stakeholders also sold off their holdings before the sale.

Of them, Yuanta Investment Co. reduced its stake in Shaperon to 4.02% from 8.33% after selling its holdings between 1,548 won and 2,053 won each in May.

Since Shaperon announced a plan in April to sell new shares at a subscription price of 2,655 won per share, its stock price has skidded to 2,040 won on June 11 from 3,425 won on April 11.

Due to the drop in stock price, Shaperon lowered the offer price to 1,801 won apiece to raise 23.7 billion won instead of the initial offer of 35.0 billion won.

The industry attributes increasing concerns about share value dilution and lingering uncertainties about the country’s biotech industry to the company’s disappointing new share issue.

The outlook for upcoming rights offerings by other Korean biotech firms also looks grim.

BLEAK OUTLOOK FOR BIO-TECH NEW SHARE ISSUE

In March, HLB Life Science Co. decided to offer 150 billion won worth of new shares.

Their offer price was set at 11,890 won apiece last month but could fall further in line with the stock’s poor performance since HLB Co.’s announcement about the US Food and Drug Administration’s rejection to approve the Korean biotech’s new cancer treatment Rivoceranib in mid-May.

Shares of HLB and its affiliates, including HLB Life Science, have been on a downward spiral since then. On Tuesday, HLB Life Science shares lost 2.2% to end at 8,860 won, about 25% lower than the offer price.

Other Korean biotech companies planning rights offerings later include SillaJen Inc., hoping to raise 114.4 billion won, Aprogen Biologics Inc. with 61.0 billion won, Bridge Biotherapeutics Inc. with 26.3 billion won, Cellid Co. with 17.5 billion won and DX&VX Co. with 50.4 billion won.

Except for SillaJen and Bridge Biotherapeutics, all other companies’ share prices have declined since announcing their rights offering plans.  

Shaperon is a clinical stage biotech company developing novel inflammasome, while other biotech companies also focus on original drug development.

Shaperon shares closed at 1,974 won apiece on Wednesday, down 3.2% from the previous day. 

Write to Seok-Cheol Choi at dolsoi@hankyung.com

Sookyung Seo edited this article.