Biopharmaceutical stocks face grim outlook in 2H

Jeong Sae-im  Published 2019.07.17  14:11  Updated 2019.07.18 10:26


Biopharmaceutical stocks remain sluggish in the second half. Stock prices have not recovered since they plummeted in the second quarter due to a series of negative factors.

They are expected to remain in a slump for the time being, as the negative factors have yet to be resolved in the second half.

Biopharmaceutical companies, which were top players in the KOSDAQ market in the first half-year, have since seen their overall market capitalization contract by more than 4 trillion won, according to the Korea Exchange (KRX).

The industry’s total market value stood at 28.9 trillion won as of the end of last month, down by 4.11 trillion won from the end of last year. The total amount of loss will get even bigger if one takes into account companies, which were not included in the calculation but regarded as biopharma stocks, such as Celltrion Healthcare.

The market capitalization of the biopharmaceutical industry has shrunken sharply since a series of negative factors hit the sector in the second quarter.

The so-called Invossa scandal sparked its slide. Kolon Life Science, which was ranked 10th on the KOSDAQ market with the market cap of 2.1 trillion billion won, has dropped to 262.5 billion won, only one-tenth of the previous level.

Kolon TissueGene, which rose to 10th place in the KOSDAQ market with the market cap of 2.5 trillion won, plunged to the 80th position, as it lost 2 trillion won. The company is currently a subject to public listing eligibility screening.

Celltrion Healthcare’s shares also plunged hit by massive block deals in May. As One Equity Partners, its second-largest shareholder, has pushed for a block deal on its 6.5 million shares following a similar deal in September last year, the share price of Celltrion Healthcare dropped from 60,000 won-70,000 won in the first half to 50,000 won now. The price marked a 52-week low with 52,000 won on July 9, also hit by rumors of the sluggish sales of its biosimilars in Europe. Its market cap, which reached 10 trillion won early this year, has dropped by about 2.5 trillion won.

Medytox, ranked at 6th place by market cap, is also struggling with allegations of illegal distribution of Meditoxin, its botulinum toxin, and GMP violation. Its shares marked a 52-week low on July 11, as additional suspicions were raised last week following that on Meditoxin in May.

The company’s total market value shrank by about 700 billion won from 3.1 trillion won at the beginning of the year to 2.41 trillion won now. Uncertainties will continue, as the Ministry of Food and Drug Safety recently announced a full-scale investigation into these allegations.

The share price of HLB, which is developing the anticancer drug Rivoceranib, halved last month, at the news that the phase 3 clinical trial of gastric cancer treatment failed to reach its target expectations. Its stock price was relatively stable earlier this year, maintaining the range between 80,000 won to 90,000 won, but fell to 30,000 won upon the news.

It marked a 52-week low with 28,550 won on July 1. The company ranked seventh place in the KOSDAQ market earlier this year but was pushed out to 16th as the market cap dropped by 1.5 trillion won.

The company said what has happened is not a clinical failure but only a delay, repeatedly announcing it will prove the value of Rivoceranib with additional clinical trials. Its stock price, however, has not shown signs of recovery yet.

The share price of SillaJen has also dropped recently due to the sell-off of 160,000 shares by one of the company’s key executives. The sell-off raised anxiety about the upcoming clinical announcement on the usability evaluation of the company’s highly anticipated new anticancer drug, Pexa-Vec.

The news of HLB’s unsuccessful phase-3 clinical trial results increased uncertainty in the industry overall and pulled down other biotech stocks as well. The share price of SillaJen, which hovered around 70,000 won earlier the year, has gradually declined until it marked the 52-week low of 40,050 won. It is even at the risk of going under 40,000 won. The company’s market cap also plunged from about 5 trillion won to 3 trillion won.

The outlook for the biopharmaceutical industry is grim because of the recent series of clinical failures and drug quality issues. The investor sentiment for the biotech pharmaceuticals industry is glum, also affecting bio companies that are about to make IPOs.

“The industry is depressed overall because of the string of negative factors and the unsolved issues of some companies. Companies that were preparing to be listed this year are seriously considering rescheduling their IPOs amid continued uncertainties,” an industry executive said.

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