Korean biopharmaceutical companies are turning to rights offering from investors and institutions to raise insufficient funds.

A rights offer can help companies raise secondary capital by issuing rights to the company's existing shareholders to buy additional shares in proportion to their existing shares within a fixed period at a specified price.

According to the Financial Supervisory Service, six companies have decided or proceeded with a paid-in capital increase in the past month. The six companies are Icure Pharmaceutical, Oscotec, AbClon, Genome & Company, Prestige Biologics, and Kainos Medicine.

Icure decided to conduct an 80 billion won ($56.1 million) worth of rights offering. Icure plans to use 47.7 billion won in debt repayment, 22.3 billion won in facility funds, and 10 billion won in operating capital.

Considering Icure's market cap on Monday was about 110 billion won, the company rights offering is more than 70 percent of its market cap.

Icure also plans to conduct a general public offering for the remaining shares after the rights offering.

Oscotec will proceed with a rights offering of 120 billion won. Of the funds raised, the company plans to use 109.77 billion won for operating funds and 11 billion won for facility funds.

The rights offering comes after Oscotec conducted a 30 billion won right offering in March.

AbClon decided to conduct a rights offering of 12 billion won to raise development funds, and Genome & Company will conduct a rights offering worth 18.8 billion won for the development of its existing pipelines and research on new pipelines.

Prestige Biologics and Kainos Medicine have already completed their rights offerings.

Prestige Biologics completed a capital increase of 60 billion won to repay debts. The rights issue was carried out for Prestige Biopharma, a group company, and with this stock acquisition, Prestige Biopharma has expanded its stake in Prestige Biologics from 3 to 24.88 percent.

Kainos Medicine raised a total of 26.3 billion won through its rights offering. The company used 17 billion won to repay debts, 8.86 billion won in operating funds, and 464 million won in other unspecified funds.

While the stock market can react positively or negatively toward a right issuing, depending on where the funds are used, a financial expert stressed that the stock market will react negatively toward the recent right issuing conducted by biopharmaceuticals as most of them are aimed at repaying debts.

"The stock market can react positively toward rights offering when it is aimed at raising costs to grow a company, such as research expenses or facility investment," said Lee Jun-soo, an analyst for Prophet Asset Management. "However, turning to rights offering to acquire management rights or pay off debts will negatively affect a company's stock price as investors can be led to believe that the company is trying to pay off corporate debt using investors' money."

Lee explained that there are some exceptions.

"Even when a company's cash flow is stable and its cash reserves are sufficient, a company may turn to rights offering to prevent deterioration of profitability when interest rates start to rise suddenly like they are doing right now," Lee said. "Therefore, when a company conducts a rights offering, investors should comprehensively consider various factors."

If a company's rights offering purpose is to repay debt, investors should look into why they are turning to external funds, Lee added.