Watch out for the time of ‘bio’

• After the bubble of 2019-2021, K-Bio has experienced an all-time recession in 2022-2023. In February, I wrote a book called ‘BiBio’ and expressed my opinion that such a cooling period would soon end. It was time to get out of the ‘biophobia’ and prepare for ‘Buy Bio’. The possibility of a rate cut and the obesity treatment craze that emerged as GLP-1 were behind this.
• Seven months later, bio-thawing mode seems to have come sooner than expected. The US Fed has made a “big cut” of cutting 0.5 percentage points, and expectations for the passage of the Biosecurity Act are growing. Some say that bio-health growth will exceed the global economic growth rate in the future. The sluggish performance outlook in the secondary battery and semiconductor sectors, which have played a leading role, is likely to have a reflective effect on the bio sector.
• The media are making a fuss about the time for bio companies. Considering the stock prices of Korean listed companies, it seems clear that spring is coming. The market capitalization of the top 20 KOSDAQ pharmaceutical bio companies (based on the closing price of 9/20) exceeds 1 trillion won. Together, the total amount amounts to 67 trillion won. The increase from the total amount (39 trillion won) at the end of last year overwhelms other industries. Compared to the figure at the peak of the bubble in October 2020, the figure (57 trillion won) seems to have entered the bubble again.
• Looking at the overall ranking of the KOSDAQ, all seven other companies are pharmaceutical bio companies except EcoproBM, Ecopro, and Enchem in the top 10. This is the case even though Celltrion Healthcare was excluded from the KOSDAQ after the merger at the end of last year. Alteogen, which ranked first in the overall market capitalization of KOSDAQ at the end of last month, is worth more than 19 trillion won (the market capitalization of its rival Halozyme in the U.S. is $7.5 billion).
• However, let’s take a closer look. Among the top 20 biotech firms, excluding pharmaceutical firms and medical device firms, the average sales of eight new drug development-focused biotech firms amounted to only 30 billion won (30 million U.S. dollars as of 2023). Even so, there is a noticeable trend of concentration on some companies. Although “black bio” is released quarterly, it seems necessary to verify performance for more than four to five years to determine sustainability.
• Above all, it is necessary to consider whether the trillions of these companies are based on “fundamentals” or are the result of simple external variables such as interest rate cuts. Interest rate cuts are positive in that they can lower financing costs for biotech and increase investors’ interest in high-return (especially bio) industries. However, as it is close to the logic of the capital market, it is far from improving the company’s original corporate value.
• It is encouraging that the US FDA approved Leclaza, a lung cancer treatment, last month. It is sufficient to serve as a role model in that it is a path that K-bio has never taken. However, since this is the outcome of Yuhan Corporation, Oskotech, and Genosco, a subsidiary that will be listed in the future, there is no need to put too much spoons on it. The market seems to be already preoccupied with finding the second Yuhan Corporation and the second Leclaza.
• I hope you don’t make the mistake of popping champagne prematurely. There are already ‘fire moths’ lurking here and there. The change of mindset toward bio is two-sided. As a listed company, a rapid rise in stock prices serves as an opportunity to raise funds, but it also means that investors’ risks increase. Having experienced bubbles in the past does not guarantee that you will respond wisely to the current volatile market. ‘Covering the stones’ becomes more difficult in an uptrend than in a downtrend.

Separating Jade Stone #Cosdaq #Yuhan #Reklaza #Genosco #BigCut #Oscotec #BiBio #FDA