[Funding] Oscotec Invests Over 100 Billion KRW in New Drug Development

Plan to Raise 120 Billion Won through Rights Offering
20% Participation by Major Shareholder in Allocated Shares

[Asia Economy Reporter Hyungsoo Park] Oscotec, a company developing new drugs for immune and cancer diseases, has launched a large-scale fundraising. Just over four months after raising 30 billion KRW by issuing convertible preferred shares in April, it decided on a rights offering. Considering the domestic stock market conditions and upcoming research and development costs, it appears that delaying fundraising was deemed impossible.

According to the Financial Supervisory Service on the 31st, Oscotec will conduct a rights offering followed by a general public offering of unsubscribed shares, allocating 0.2 new shares per existing share. The planned issue price per share is 18,750 KRW, with a total of 6.4 million shares to be issued. It aims to raise 120 billion KRW to be used for pipeline research and development expenses and facility investments.

Oscotec is the original developer of the non-small cell lung cancer treatment 'Layzatinib,' which was launched domestically last year. Janssen in the U.S., which acquired commercialization rights from Yuhan Corporation, is developing a combination therapy of Layzatinib and the lung cancer targeted therapy Amivantamab. Approval is expected as early as next year.

In addition to Layzatinib, various targeted therapies are being developed. The pipeline includes ▲ 'Sevidoflepin,' a SYK inhibitor currently in global Phase 2 clinical trials for immune thrombocytopenia ▲ 'SKI-G-801,' a dual AXL·FLT3 inhibitor in Phase 1 trials for solid tumors in Korea ▲ a tau antibody Alzheimer's treatment expected to enter global clinical trials early next year ▲ and 'OCT-598,' a dual EP2·EP4 inhibitor immuno-oncology agent in preclinical development aiming for clinical entry in the second half of next year.

Oscotec plans to raise the necessary pipeline research and development funds through this capital increase by 2024. Based on the fundraising, Oscotec expects to achieve more than two technology transfers within the next two to three years.

Sevidoflepin is being developed as a SYK inhibitor for rheumatoid arthritis and immune thrombocytopenia. SYK is a kinase that influences cell survival and proliferation through activation signaling of B-cell receptors and is mainly being developed as a treatment for autoimmune diseases. Oscotec expects to release topline data as early as this year.

SKI-G-801 is being developed as a treatment for acute myeloid leukemia (AML). The treatment rate with existing chemotherapy is lower in elderly AML patients. According to Phase 1 data announced in April this year, complete remission was confirmed in one out of five patients. It showed higher therapeutic efficacy compared to competing drugs in preclinical studies and was considered one of the pipelines with great potential.

Considering the development of multiple pipelines, financial stability is relatively high. Based on consolidated financial statements as of the end of the first half of this year, the debt ratio was 42.85%, current ratio 210.59%, and borrowings dependency 12.41%. The industry averages for small and medium enterprises in medical substances and pharmaceuticals are a debt ratio of 70.86%, current ratio of 178.71%, and borrowings dependency of 20.53%.

Although financial stability is relatively high, there are limits to continuously investing in clinical costs. Last year, sales were 3.9 billion KRW with an operating loss of 28.1 billion KRW. For the first half of this year, cumulative sales were 2.6 billion KRW with an operating loss of 15.3 billion KRW.

As of the end of the first half, it holds 10.2 billion KRW in cash and cash equivalents and 21.5 billion KRW in financial assets. With research and development expenses expected to exceed 100 billion KRW by 2024, the need for fundraising has increased.

Kim Jung-geun, the largest shareholder and CEO, will acquire 20% of the newly allocated shares. After the capital increase, the largest shareholder's stake is expected to decrease from 14.34% to 12.40%.

This content was produced with the assistance of AI translation services.