[CB Crisis]⑭ iQure Faces Setback in Put Option Response Due to Reduced Capital Increase Scale

Stock Price Drop Causes Planned Price of New Shares in Paid-in Capital Increase to Plummet
Provisional Fundraising Scale Halved
Facing Potential Fund Shortage for February Next Year Put Option Response

[Asia Economy Reporter Hyungsoo Park] IQure's plan to raise funds for debt repayment by issuing new shares has encountered setbacks. As the stock price continues to decline, the fundraising scale is expected to shrink significantly compared to the original plan.

According to the Financial Supervisory Service's electronic disclosure system on the 3rd, IQure, which is promoting a paid-in capital increase, set the first issuance price of new shares at 3,270 KRW. It is expected to raise 40.3 billion KRW by issuing 12,326,650 new shares.

IQure held a board meeting on September 19 and approved a paid-in capital increase plan through a rights offering followed by a general public offering of unsubscribed shares. At that time, the planned issuance price was 6,490 KRW, with a plan to raise a total of 80 billion KRW. The funds were expected to be used for debt repayment as well as facility and operating expenses.

Since the board resolution, concerns about shareholder value dilution due to the large-scale capital increase and the sluggish stock market have overlapped, leading to a continued decline in IQure's stock price. The stock price, which was above 10,000 KRW, recently fell below 5,000 KRW.

The final issuance price will be confirmed on the 30th. Unless the stock price dramatically rebounds before the final issuance price is set, the fundraising scale is likely to be around 40 billion KRW.

Previously, in February last year, IQure issued the 4th series of convertible bonds (CB) worth 50 billion KRW to cover costs for U.S. clinical trials and research and development (R&D) of the donepezil patch, as well as factory expansion funds. The raised funds were used for affiliate investments, donepezil clinical trial expenses, selling and administrative expenses, and product purchases.

At the time of the 4th CB issuance, the conversion price was 61,890 KRW, with an adjustment mechanism allowing the conversion price to be lowered to 80% of the initial conversion price. After the paid-in capital increase, the conversion price will drop to 16,867 KRW. Considering the current stock price level, it is expected that the early redemption right (put option) will be exercised. Bondholders can exercise the put option starting February 2 next year.

IQure plans to use all the funds raised from the paid-in capital increase to repay the CB. The outstanding principal of the 4th CB amounts to 47.7 billion KRW. As of the end of the first half, IQure holds 8.9 billion KRW in cash and cash equivalents. It also owns real estate, including land and buildings, valued at 88.6 billion KRW on the book value basis. Some of these real estate assets have been provided as collateral for short- and long-term borrowings totaling 45.7 billion KRW. If repayment of these borrowings becomes difficult, partial ownership of the collateral assets may be lost. Cumulatively in the first half, IQure recorded sales of 27.7 billion KRW and an operating loss of 10.2 billion KRW. Depending on the performance in the second half, financial soundness warnings may arise early next year.

IQure has continued research and development to create donepezil, an Alzheimer's dementia treatment, in patch form. It completed Phase 3 clinical trials in February last year and obtained domestic and export product approvals in November last year. The product was launched under the name "Donerion" through Celltrion Pharm. Sales are expected to increase significantly starting next year.

On a consolidated basis for the first half, the debt ratio was 147.3%, up 29 percentage points from 118.3% at the end of last year. Total borrowings amounted to 99.3 billion KRW, with a borrowing dependency ratio of 48.4%. Short-term borrowings and current portion of long-term debt maturing within one year totaled 44.8 billion KRW.

Chairman Youngkwon Choi, the largest shareholder, will subscribe to 30% of the allocated new shares. The participation scale of related parties has not yet been determined. After the paid-in capital increase, the shareholding ratio of the largest shareholder and related parties may decrease from 17.44% to 12.49%.

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