Global investment bank (IB) UBS and KOSDAQ market "bellwether" Alteogen traded barbs. With Merck (MSD)'s subcutaneous injection (SC) formulation of the immuno-oncology therapy "Keytruda Qurex (Keytruda)" having received U.S. Food and Drug Administration (FDA) approval, differing views emerged over expectations for Alteogen, which transferred the technology.
According to the financial investment industry on the 24th, UBS on the 22nd set an investment opinion of "sell" and a target price of 270,000 won for Alteogen. That was about half of Alteogen's closing price that day (507,000 won).
The commercial viability of Merck's SC-formulation Keytruda is the biggest point of contention. This product improves the method of administration. Previously, it had to be administered by intravenous injection, inserting a needle directly into a vein, but by applying Alteogen's "ALT-B4" technology, a subcutaneous injection can also be effective. The administration time was shortened from 2 hours to 1 minute.
UBS acknowledged that the FDA clearance of the SC-formulation Keytruda itself is positive, but argued that the pace of commercialization could be slower than the market expects. It said the market's sales expectation of $20 billion (about 28 trillion won) is inflated and projected actual sales would be $8 billion (about 11 trillion won). Accordingly, the technology royalties Alteogen would receive would also decrease.
UBS also raised questions about whether Alteogen's ALT-B4 platform can be applied to more drugs going forward. UBS said, "There are expectations that Alteogen's technology can extend to antibody-drug conjugates (ADC), but there is considerable uncertainty about this as well," adding, "Commercial visibility through partnerships with corporations other than Merck is limited, and caution is needed in assuming that technology expansion will translate into revenue."
Alteogen issued a rebuttal the day after UBS's report was released. It said the SC-formulation Keytruda offers greater convenience than competing products, and that, along with FDA approval, a recommendation for approval in Europe would accelerate market expansion faster than expected.
In particular, Alteogen said, "Although the FDA approval verified the technological strength and safety of ALT-B4, we regret that the (UBS) report was written using the same logic as in the past," and added, "It is difficult to accept a report that reflects only negative cases and situations."
This is not the first time UBS and Alteogen have clashed. UBS issued a report on Alteogen last month with a "sell" recommendation. Alteogen immediately released a statement, saying, "The UBS report is based on unrealistic assumptions drafted without prior consultation."
In the market, observers cite Alteogen's relatively high foreign equity ratio as the reason it is sensitive to the UBS report. Until the UBS report came out, foreign investors held more than 15% of Alteogen's equity. Considering that the foreign equity ratios of top market-cap biotech stocks on the KOSDAQ are around 10%, that was about 5 percentage points higher.
However, after UBS's report last month, foreign investors had a net sell advantage of 100 billion won in Alteogen shares through the 22nd of this month. In just two days, the 23rd and 24th, after the second report was released, they net sold 120 billion won worth. Foreign investors' equity ratio in Alteogen also fell to 13.7%. Alteogen's share price also fell 8.4% (42,500 won) over two trading days to close at 464,500 won that day.
For now, domestic securities firms are siding with Alteogen. Shinhan Investment & Securities maintained a target price of 730,000 won, saying, "Alteogen will reap royalty profits worldwide." Hana Securities also maintained a target price of 590,000 won, projecting that "FDA approval will lead to the inflow of new partners."