As domestic bio corporations are being added one after another to the Korea index of Morgan Stanley Capital International (MSCI), a benchmark for global investors' portfolios, expectations are growing for inflows of overseas funds.
In particular, with Samsung Epis Holdings newly included, assessments say global market interest in Korea's pharmaceutical and biotech sectors has risen further.
According to the industry on the 11th, MSCI newly added Samsung Epis Holdings to the Korea index components. The domestic pharmaceutical and biotech corporations previously included in the MSCI Korea index were Celltrion, Samsung Biologics, Alteogen, HLB, Yuhan, and SK Biopharmaceuticals, six in total. With this addition, the related components have increased to seven.
The MSCI index is used as a benchmark by investors worldwide and regularly adjusts its components by reflecting market capitalization and free-float market capitalization. Once included in the index, it becomes possible to attract overseas funds that track it. The industry sees this inclusion as a positive signal for attracting foreign investment and improving access to the capital market.
Samsung Bioepis, the operating company of Samsung Epis Holdings, is drawing attention amid the expansion of the global biosimilar market. With the potential creation of a policy environment favorable to biosimilars in the United States due to the launch of the so-called "TrumpRx," it is cited as one of the corporations likely to benefit.
Based on its biosimilar business, the company is broadening its research and development (R&D) scope into new drugs. Recently, the U.S. Food and Drug Administration (FDA) approved the investigational new drug (IND) application for the phase 1 trial of the antibody-drug conjugate (ADC) candidate "SBE303," and the company began a global phase 1 trial. It aims to file for at least one IND approval each year.
However, some in the industry say it is important to verify structural stability rather than simple top-line growth. Although Samsung Bioepis posted record-high sales last year, operating profit fell 14% from a year earlier. Analysts say this reflects the impact of larger one-off revenue (milestones) recognized in the previous year than last year.
Accordingly, a key focal point is whether the company can maintain stable sales and profit structures centered on product sales without relying on milestone revenue. How much it can reduce quarterly earnings volatility and how efficiently it can manage expense increases are also cited as variables that will determine the trajectory of future results.
This MSCI index inclusion is meaningful from a capital strategy standpoint as well. Global funds that track the MSCI index are so-called "passive funds" that automatically buy newly added components as the index changes, which can help ease share-price volatility and bolster market confidence. For biotech corporations, where R&D investment is inevitable, there is also a possibility of a more favorable funding environment in future rights offerings or investment attraction.
Along with this, many domestic bio corporations were also added to the MSCI Global Small Cap index. Five companies, including Ildong Pharmaceutical, AprilBio, L&C BIO, and Orum Therapeutics, made the list.
The MSCI Global Small Cap index is composed of corporations with relatively smaller market capitalizations and is used as a key investment indicator by overseas institutional investors who prioritize mid- to long-term growth potential. The industry says the inclusion in the Small Cap index is significant in that domestic bio corporations have been officially added to the watch list of global investors.
An industry official said, "This inclusion in the MSCI Global Small Cap index means that domestic bio small caps have begun to be captured in earnest on the global investment radar, which used to focus on large caps," adding, "Not only passive funds that track the index but also overseas active investors who prioritize growth potential may show interest at the same time."
The official added, "Because the Small Cap index prioritizes future growth stories and technological competitiveness over immediate results, it could serve as a starting point for a full-fledged assessment of the mid- to long-term value of domestic bio corporations."