The domestic pharmaceuticals and biotech sector, which was sidelined in the securities market in the first half of the year, is drawing attention over whether it will rebound in the second half. Expectations are rising on broader clinical presentations at global conferences, a recovery in licensing-out (L/O), and the potential inflow of policy funds.
Within the pharmaceuticals and biotech industry, some also expect a "sorting the wheat from the chaff" market in which funds concentrate on corporations that have achieved licensing-out results and secured financial stability.
◇ Why K-bio stocks underperformed in the first half
An analysis of this year's index trends via Korea Exchange (KRX) on the 22nd showed that while the KOSDAQ index rose about 16% this year, the KOSDAQ pharmaceuticals index fell about 11%, continuing to lag the market.
On Jan. 2, the first trading day, the KOSDAQ pharmaceuticals index (closing basis) started at 13,288.62 and climbed to 17,420.86 on Mar. 27. But it hit this year's low at 11,819.31 on May 20.
In the securities industry, some say excessive concerns have been priced in, noting that although last year's licensing-out value hit an all-time high, surpassing 2021 during COVID-19, the biotech sector index remains below the level of that time.
Kiwoom Securities analyzed, "Even though K-bio's technology transfer set an all-time high last year, surpassing the 2021 COVID level, the recent KOSDAQ pharmaceuticals index is below the 13,300 level of 2021."
While investment demand also shifted to other sectors such as semiconductors, sharp stock declines triggered by noise over contract terms and clinical data at major pharmaceuticals and biotech corporations shook confidence and acted as a factor prompting investors to avoid the biotech sector.
In practice, controversies over the reliability of Sam Chun Dang Pharm, and debates surrounding detailed contract terms and key clinical data at Alteogen and ABL Bio, sent share prices swinging.
◇ "Aiming for a turnaround" signals of a K-bio rebound
In the securities industry, views are emerging that the domestic pharmaceuticals and biotech sector could rebound as the year heads into the second half.
Last year, domestic pharmaceuticals and biotech technology transfer reached about 14 deals totaling $13.7 billion, an all-time high. So far this year, domestic biotech licensing-out totals about $6.5 billion, reaching roughly half of last year's full-year level. Given first-half market sentiment, this is seen as a better-than-expected result.
Alteogen further demonstrated its competitiveness by transferring its ALT-B4 platform technology to GSK plc and Biogen in the United States, respectively.
Big Pharma in the West is actively pursuing platform technologies that can be combined with their own new drugs, and large Chinese drugmakers are increasingly seeking touchpoints with Korean biotech companies to enter the global market.
International conferences and exhibitions in the second half are also drawing attention. On the 27th, the European Association for the Study of the Liver (EASL) convenes, and on the 29th, the American Society of Clinical Oncology (ASCO) annual meeting opens. In June, the Biotechnology Innovation Organization's event, Bio International Convention (Bio USA), will be held, followed by the European Society for Medical Oncology (ESMO) annual meeting in Oct.
Research results presented at major conferences have led to medium- to long-term outcomes such as licensing-out and product approvals. Bio USA is a venue where global drugmakers, biotech ventures, and research institutions gather to discuss business partnerships including joint research, technology transactions, and investment attraction.
At the European Association for the Study of the Liver, D&D Pharmatech will unveil for the first time the phase 2 results for DD01, being developed as a treatment for metabolic dysfunction-associated steatohepatitis (MASH).
At ASCO, GI Innovation, ViGenCell, and Lunit will deliver oral presentations. GI Innovation's immuno-oncology candidate "GI-101A" is a pipeline being developed with the goal of licensing-out, and is viewed as having additional licensing-out potential if it secures positive clinical data.
ViGenCell will present phase 2 results for its cell therapy "VT-EBV-N." The company said, "Only a small number of the thousands of abstracts submitted are selected for the oral presentation session," adding, "Based on cell therapy clinical data, this is the first case of a domestic corporation being selected for an official oral presentation session at ASCO."
◇ Policy and liquidity are key… sorting the wheat from the chaff begins
Changes in interest rates and policy environments are also major variables that will affect the biotech sector. As the biotech sector is a growth stock group valued on future growth potential, lower rates could ease the burden.
Expectations are also rising for the inflow of policy funds led by the government. If the business development company (BDC) system and the Public Growth Fund, aimed at revitalizing biotech investment, go into full operation from the second half, liquidity could flow primarily to unlisted and KOSDAQ biotechs.
From next year, the government is also pushing a policy to foster contract research, development and manufacturing (CRDMO), extending beyond simple contract manufacturing to include research and development. Corporations with global manufacturing competitiveness—such as BTGEN, an affiliate of Dong-A Socio Holdings, Samsung Biologics, and ST Pharm—stand to benefit.
However, rather than a broad-based surge across the entire sector as in the past, a "differentiation market" is expected in which funds concentrate on corporations that demonstrate growth potential through earnings, technology prowess, and clinical data.
From the second half of 2021, the number of evaluation items for the KOSDAQ technology special-listing system increased from 26 to 35, raising the bar for listing. As a result, since 2022 the number of biotech listings has dropped sharply, and only corporations that proved technological merit and business feasibility succeeded in listing.
Kim Seon-a, a Hana Securities analyst, noted in a report the previous day, "As the domestic biotech sector shows high correlation with U.S. interest rates and the U.S. pharmaceuticals and biotech market trend, if weak earnings continue, valuation recovery could be limited."
Kim said, "For the pharmaceuticals and biotech sector to recover share prices, proving growth through technology transfer is essential, and given the seasonality in which technology transfer concentrates in the fourth quarter, it is necessary to focus on second-half events."