[CB Crisis] Eutilex Continues Early Redemption of CB Issued Two Years Ago Before Maturity

Demand for Early Redemption Amid Stock Prices Below Conversion Price
Operating Expenses to Be Raised Until Next Year Through Rights Offering
Clinical Success Crucial Due to Major Shareholder Stake Dilution

[Asia Economy Reporter Hyungsoo Park] UtilX, a next-generation immuno-oncology drug developer, continues to repay convertible bonds (CB) issued two years ago. As the stock price remains below the conversion price, investors are exercising their early redemption rights (put options) instead of waiting until maturity.

According to the Financial Supervisory Service's electronic disclosure system on the 7th, UtilX decided to acquire 4.88 billion KRW worth of the first series CB before maturity. After the acquisition, only 1.46 billion KRW worth of CB remains. Previously, in August, UtilX also acquired and canceled 12.44 billion KRW worth of CB.

In May 2020, UtilX issued the first series CB to domestic institutional investors, raising 29 billion KRW. The funds were used for facility and operating expenses. Since the bonds were issued with a 0% interest rate, it is advantageous for UtilX not to repay the debt until maturity. During a period of rising base interest rates, investors holding UtilX CBs may find it more cost-effective to exercise the put option as soon as possible if the likelihood of conversion is low. The put option can be exercised two years after the CB issuance date.

UtilX's stock price is around 7,000 KRW, below the conversion price of 15,295 KRW. Due to continued sluggishness in the domestic stock market, the stock price has fallen more than 40% this year, underperforming the KOSDAQ index's 32.7% decline over the same period.

UtilX recently raised over 50 billion KRW through a rights offering. Although the initial plan was to raise about 70 billion KRW, the amount was reduced due to the stock price decline. The funds secured cover clinical trial costs through the end of next year. The subscription rate among existing shareholders holding subscription warrants was 76.44%. Any unsubscribed shares were issued through a public offering.

Established in 2015, UtilX is a bio venture focused on developing new immunotherapies to treat intractable diseases such as cancer and autoimmune disorders without side effects. The company is developing next-generation immuno-oncology drugs, including T-cell therapies, CAR-T cell therapies, and immune-modulating antibody therapies, which minimize side effects and improve treatment efficacy compared to conventional anticancer drugs. UtilX possesses an immuno-oncology drug development platform that maximizes anticancer effects by activating killer T cells. The immune checkpoint activator 4-1BB, first discovered by CEO Byungse Kwon, plays roles in ▲activating killer T cell cytotoxicity ▲enhancing immune memory ▲strengthening survival capabilities.

Having recently completed fundraising, UtilX is expected to smoothly complete repayment demands on the remaining CB. By strengthening financial soundness through the capital increase, UtilX plans to demonstrate the efficacy of its pipeline during clinical trials. UtilX has secured technology to isolate and culture 10,000 T cells responsive to patient tumors from the 1 trillion T cells in the body. The company is developing T-cell therapies applying this T-cell extraction and culture technology. EU101, which treats solid tumors such as colorectal cancer and non-small cell lung cancer, is undergoing Phase 1/2 clinical trials in Korea and the United States. EU103, an antibody therapy targeting the immune checkpoint molecule VSIG4, is in preclinical stages. The plan is to complete Phase 2 clinical trials and license out the technology by 2025. Despite the need to invest substantial clinical costs annually, the largest shareholder and related parties’ shareholding ratio has dropped to the 20% range. In the previous rights offering, CEO Byungse Kwon subscribed to only 30% of the allocated shares.

With limited additional investment capacity from the largest shareholder, UtilX raised less than initially planned. If the company fails to demonstrate efficacy through concrete results before fully utilizing the funds raised from the capital increase, it may face a crisis.

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