Attention is on whether Korea's pharmaceutical and biotech sector, which was sidelined in the securities market in the first half of this year, will rebound in the second half. Expectations are rising for more clinical presentations at global conferences, a recovery in licensing-out (L/O), and potential inflows of policy funds.
In the pharmaceutical and biotech industry, some expect a continued market that "separates the wheat from the chaff," with funds concentrating on corporations that have achievements in technology licensing and financial stability.
◇ Why K-bio stocks underperformed in the first half
An analysis of this year's index trends through the Korea Exchange (KRX) on the 22nd showed that while the KOSDAQ index rose about 16% this year, the KOSDAQ pharmaceuticals index fell about 11%, lagging the market.
On Jan. 2, the first trading day, the KOSDAQ pharmaceuticals index (closing basis) started at 13,288.62, climbed on an upward curve, and surged to the 17,420.86 level on Mar. 27. But on May 20, it recorded this year's low at 11,819.31.
In the securities industry, some say that despite last year's technology licensing volume hitting an all-time high, surpassing 2021 during COVID-19, the biotech sector index remains below the level of that time, suggesting excessive concerns have been priced in.
Kiwoom Securities analyzed, "Although K-bio's technology transfer hit 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 shifted to other sectors such as semiconductors, sharp stock declines amid noise over contract terms and clinical data at major pharmaceutical and biotech corporations shook confidence and became a factor driving investors away from the biotech sector, observers said.
In fact, the reliability controversy at Sam Chun Dang Pharm and debates over contract details and key clinical trial data at Alteogen and ABL Bio, among others, sent share prices swinging.
◇ "Aiming for a turnaround" signals of a K-bio rebound
In the securities industry, there is a growing view that the domestic pharmaceutical and biotech sector could rebound toward the second half.
Last year, domestic pharmaceutical and biotech technology transfers totaled about 14 deals worth $13.7 billion, an all-time high. So far this year, technology licensing concluded by Korea's biotech industry totals about $6.5 billion, reaching roughly half of last year's total. Considering first-half market sentiment, the results are seen as better than expected.
Alteogen transferred its ALT-B4 platform technology to GSK plc and U.S.-based Biogen, once again demonstrating its competitiveness.
Big pharma in the West are actively working to secure platform technologies that can be combined with their own new drugs, and large Chinese pharmaceutical companies are increasingly seeking to expand touchpoints with Korean biotech companies to enter the global market.
International conferences and exhibitions in the second half are also drawing interest. On the 27th, the European Association for the Study of the Liver (EASL) will convene, and on the 29th, the American Society of Clinical Oncology (ASCO) annual meeting will open. In June, the Bio International Convention (BIO USA), organized by the Biotechnology Innovation Organization in the United States, will be held, followed by the European Society for Medical Oncology (ESMO) annual meeting in Oct.
Research results presented at major conferences have translated into outcomes such as mid- to long-term technology licensing and product approvals. BIO USA is a venue where global pharmaceutical companies, biotech ventures, and research institutions gather to discuss business partnerships, including joint research, technology transactions, and investment attraction.
At EASL, D&D Pharmatech will unveil for the first time phase 2 results for DD01, under development as a treatment for metabolic dysfunction-associated steatohepatitis (MASH).
At ASCO, GI Innovation, ViGenCell, and Lunit will give oral presentations. GI Innovation's immuno-oncology candidate "GI-101A" is a pipeline under development targeting technology licensing, and is seen as having the potential for additional out-licensing if it secures positive clinical data.
ViGenCell will present phase 2 study results for the cell therapy "VT-EBV-N." The company said, "Only a small number of submissions are selected for oral presentation sessions out of the thousands of abstracts submitted," adding, "This is the first case in which a domestic company was accepted into ASCO's official oral presentation session based on cell therapy clinical data."
◇ Policy and liquidity are key… sorting the wheat from the chaff begins
Changes in interest rates and the policy environment are key variables that will affect the biotech sector. Because biotech is a growth stock group valued on future growth, a decline in interest rates can ease the burden.
Expectations are also growing for inflows of government-led policy funds. If the Business Development Company (BDC) system and the Public Growth Fund, aimed at revitalizing biotech investment, go into full operation in the second half, liquidity could be supplied to unlisted and KOSDAQ biotech firms.
Starting next year, the government is also promoting a policy to foster contract research, development and manufacturing organizations (CRDMO), extending beyond simple contract manufacturing to include research and development. Corporations that have secured 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 "differentiated market" is expected in which funds concentrate on corporations that demonstrate growth potential through earnings, technological prowess, and clinical data.
Since the second half of 2021, the number of evaluation items in the KOSDAQ technology special listing system increased from 26 to 35, raising the listing threshold. As a result, the number of biotech listings has fallen sharply since 2022, and only corporations that proved technological strength and business viability succeeded in listing.
Kim Seon-a, a researcher at Hana Securities, said in a report the previous day, "With the domestic biotech sector showing strong linkage to U.S. interest rates and the U.S. pharmaceutical and biotech market trend, if weak earnings persist, valuation recovery could be limited."
Kim said, "For the pharmaceutical and biotech sector to see a share-price recovery, proving growth through technology transfer is essential, and given the seasonality in which transfers concentrate in the fourth quarter, it is necessary to pay attention to second-half events."