[비즈한국] Oscotec039200 faces an inevitable setback in its plan to increase the total number of authorized shares to make its U.S. new drug development subsidiary, Genosco, a 100% owned subsidiary. This follows strong backlash from minority shareholders who raised suspicions that the company might be infringing on shareholder interests to acquire the stake in Genosco. However, since the shareholders agree with the company's underlying purpose of acquiring the Genosco stake, the key will be how effectively the company can resolve these doubts.
On the 5th, an extraordinary general meeting of shareholders for Oscotec was held at Korea Bio Park in Bundang, Seongnam-si, Gyeonggi-do. The agenda for partially amending the articles of incorporation, which was the most contentious point between minority shareholders and the company, was rejected with 47.8% in favor, 45.8% against, and 6.4% abstaining. Amending the articles of incorporation requires the attendance of shareholders holding at least one-third of the total issued shares, with at least two-thirds of the voting rights of those in attendance in favor. The number of shares in favor must be more than twice those opposed to approve the amendment.
Oscotec's plan was to increase the total number of authorized shares from the existing 40 million to 50 million and use the newly available shares to raise funds for securing the remaining stake in Genosco. As of November 7, the total number of shares issued by Oscotec stood at 38,258,176. The strategy was to secure over 10 million in additional shares and then issue new shares to external investors to raise investment capital.
However, with the rejection of the amendment to the articles of incorporation, Oscotec’s plan to raise funds for the Genosco stake acquisition has hit a wall. As a result, questions are being raised about whether the company will maintain its strategy of acquiring the Genosco stake. Lee Sang-hyun, co-CEO of Oscotec, stated, "We will discuss this at the board of directors meeting, listen to the opinions of our shareholders, and then decide. It is difficult to say what decision will be made at this moment."
Oscotec aims to acquire a 100% stake in Genosco to ensure that all milestone and royalty revenues from 'Leclaza' (generic name: lazertinib) are attributed to Oscotec shareholders. Both Oscotec and Genosco are the original developers of Leclaza, a non-small cell lung cancer treatment that has passed the threshold of the U.S. Food and Drug Administration (FDA). Oscotec and Genosco transferred lazertinib to Yuhan Corporation000100 in 2015, and Yuhan Corporation licensed the technology to Janssen, a subsidiary of global pharmaceutical company Johnson & Johnson (J&J), in 2018. Under that licensing agreement, Yuhan Corporation was to receive 60% of the milestone and royalty revenues, while Oscotec and Genosco were each to receive 20%. Leclaza's sales in the U.S. grew to $252 million (350 billion KRW) in the second quarter, leading to larger royalties, and milestones continue to accrue as the drug is launched in more countries overseas.
Currently, Genosco’s shares are held by Meritz Securities (20%), Kim Sung-yeon (13%), the son of former Oscotec CEO Kim Jung-keun, Yuhan Corporation (5%), and others (3%). Based on a corporate valuation of around 700 billion KRW, which was recognized when Genosco pushed for a KOSDAQ listing late last year, Oscotec would need approximately 290 billion KRW to acquire the remaining shares. As of the third quarter of this year, on a consolidated basis, Oscotec holds 125.4 billion KRW in current assets, including 14.9 billion KRW in cash and cash equivalents and 94 billion KRW in other financial assets. Even disposing of all current assets would not be enough to easily secure the funds for the Genosco stake. Furthermore, some value Genosco at over 1.4 trillion KRW due to the ongoing Leclaza milestone and royalty revenues, meaning Oscotec may need to secure even more capital.
However, it appears that shareholders rejected the amendment because they suspect the company is trying to buy out Genosco’s external shareholders at an inflated price. While they agree with increasing the total authorized shares, they refused to consent until their suspicions are addressed. Choi Young-gap, representative of the Oscotec Minority Shareholders' Association, said, "I don't know why they are pushing this so urgently when it could be handled at next year's regular general meeting. I am suspicious about whether the company is trying to provide more benefits to Meritz Securities and other shareholders."
Nonetheless, since they are not opposed to making Genosco a 100% subsidiary or increasing the number of authorized shares in principle, they have hinted at the possibility of reaching an agreement through communication with the company before the regular general meeting next March. "Wouldn't it be good for the shareholders if Oscotec performs well?" said Representative Choi. "If our concerns are resolved, shareholders can support the company's policy." He added, "I also hope there will be ways for shareholders to participate in the company's major decision-making processes. There is absolutely no intention to seize management control."