CJ Bioscience conducts paid-in capital increase of $50 mn

South Korea's CJ Bioscience Inc., a pharmaceutical company specializing in intestinal microorganisms called microbiomes, will conduct a paid-in capital increase of 65 billion won ($49.2 million) to develop new drugs.

CEO Chun Jong-sik is also participating in this to raise funds for R&D investment.

The company on Monday said its board of directors in a meeting decided to add 3,233,830 shares through a general public offering of forfeited shares after allocation to stakeholders. The price of a new share is an estimated 20,100 won and the record date of allotment is July 10.

The major shareholders include CJ CheilJedang with 43.8% and the CEO with 6.6%.

"Because its entire stake will participate in the increase, the largest shareholder CJ CheilJedang will see no dilution of equity," a CJ Bioscience source said. "The ratio of CEO Chun's participation remains undecided."

In March, CJ Bioscience acquired all candidate materials from 4D Pharma PLC, a UK-based leader in microbiome-based anticancer drug development. Early this year, CJ Bioscience received approval from the US Food and Drug Administration to conduct Phase 1 and 2 clinical trials for CJRB-101, a microbiome-based immuno-anticancer candidate drug.

Significant costs are required for clinical testing of these candidate drugs and follow-up research.

"This paid-in capital increase is for achieving the goal of new drug development," a CJ Bioscience source said. "We will also create synergy with CJ CheilJedang's health functional food unit by launching a platform to analyze microbiome data."

CJ Bioscience's share price on Tuesday fell nearly 10% on news of its paid-in capital increase.

The company's stock on the secondary stock market Kosdaq closed at 27,650 won, down 9.8% from Monday. During trading on Tuesday, the stock fell as much as 11.4% to 27,150 won.

A large-scale capital increase has the effect of diluting the value of shares and is often a factor in a stock's decline.

Write to Jeong Min Nam at peux@hankyung.com