dailypharmkorea

Opinion
[Reporter's view] Paid-in capital increase & bio ventures
by Lee, Seok-Jun Sep 26, 2023 05:49am
Bio ventures have recently begun to raise funds through paid-in capital increases allotted to shareholders as promised. This is a phenomenon that has recently emerged as the bio market is not doing well, making it difficult to attract investment from institutional investors such as VCs (venture capitals) or specific third parties. Shareholders express the current situation as a ‘crying train’. Even though there is a high possibility that the stock price will fall, it is because of the worry. Just looking at the past three to four months, there are numerous bio ventures that have completed or are in the process of capital increase. CJ Bioscience, PCL, SCM Life Science, Cellid, Voronoi, SD Biosensor, and Noul have completed the paid-in capital increase. MedPacto, Micobiomed, Lunit, EDGC, Kangstem, Vaxcell-bio, Medi-post, etc. are in progress. Among them, SD Biosensor (10.4 billion won), Lunit (201.9 billion won), Medi-post (120 billion won), MedPacto (115.9 billion won), and Vaxcell Bio (100.6 billion won) decided to increase paid-in capital on a large scale of more than 100 billion won. Honestly, it is difficult to identify bio ventures. This is because it is virtually impossible to judge technological capabilities. We only rely on the data disclosed by the company and judge its value by referring to technology exports, partners, research team history, etc. While watching the paid-in capital increase trend, we believe that it may be possible to separate bio ventures in other ways. For example, it is possible to understand valuation through ▲how often financing is raised, ▲how well the fund use plan matches reality, and ▲whether the financing plan announced through IR, etc. has been reversed. In addition, ▲how often management changes, ▲whether the securities report at the time of IPO is implemented, ▲the largest shareholder's participation in bequests, etc. can be objective factors. Of course, financing is also an important element of corporate management. However, the problem is that even as the years go by, more and more companies rely on financing rather than their own ability to survive. In a time where paid-in capital increases are rampant, why not try creating an opportunity for bio ventures to separate the pros and cons? There are not many factors that can determine a company's valuation as much as financing issues. This is especially true for bio ventures where liquidity is vital.