Samsung Biologics’ spinoff sparks optimism over corporate value

Samsung Biologics' Bio Campus in Incheon / Courtesy of Samsung Biologics

Samsung Biologics has completed the spinoff off its biosimilar developing subsidiary Samsung Bioepis, with stocks of Samsung Biologics and Samsung Epis Holdings finishing their first trading session as separate companies on Monday.

Analysts are revising up the estimated corporate value of the biopharmaceutical contract manufacturer, noting that its streamlined structure will be combined with lowered U.S. tariff risks to improve market sentiment on the company.

Samsung Biologics closed at 1.789 million won on Monday, down 0.45 percent from Oct. 29, the last session before the stock was suspended from trading due to the spinoff. Despite separating its previously wholly owned subsidiary Samsung Bioepis, the market appears to believe that the company’s intrinsic value remains largely unchanged.

In May, Samsung Biologics announced it would spin off a business division overseeing its subsidiary and new investments to create Samsung Epis Holdings. The new holding company would acquire the 100 percent stake in Bioepis from Biologics. With Samsung Epis Holdings debuting as an independent stock on the benchmark KOSPI market on Monday, the spinoff has now been completed.

With the spinoff, Samsung Biologics has cleared potential conflicts of interests, which is a major concern that its client drugmakers have been raising.

With big pharmaceutical companies such as Pfizer, Merck, Roche and Eli Lilly as clients, Samsung Biologics has been making efforts to address clients’ concerns over potential leaks of drug development knowledge and manufacturing technologies to Samsung Bioepis.

These concerns have grown in recent years as Samsung Bioepis began accelerating the development of not only biosimilars but also novel drugs, including antibody-drug conjugate (ADC) cancer treatments.

Samsung Biologics' antibody-drug conjugate facility in Incheon / Courtesy of Samsung Biologics

“By spinning off the Bioepis division, whose profitability can fluctuate depending on novel drug development, Samsung Biologics is now positioned for a more stable and predictable growth in corporate value,” Hana Financial Investment analyst Kim Seon-a said.

Mirae Asset Securities analyst Kim Seung-min on Monday estimated that Samsung Biologics’ corporate value will likely reach 106 trillion won ($71.36 billion) up from 91 trillion won before the spinoff. He set a price target of 2.3 million won.

“The recent 1.8 trillion won contract signed with a U.S.-based company is interpreted as a sign that clients have resumed investment decisions that had been on hold, following the easing of U.S. policy risks such as tariffs and drug pricing,” Kim said. “This increases the likelihood of additional orders for Samsung Biologics’ Plant 5."

Samsung Biologics posted a record-high quarterly revenue of 1.26 trillion won on a standalone basis in the third quarter. Its cumulative sales from January to September stood at 3.27 trillion won, nearing last year’s total sales of 3.5 trillion won.

The company noted that the strong performance was driven by full-capacity operations across Plants 1 to 4 on the back of large-scale orders, as well as early new orders that ramped up the output of Plant 5.

After Monday’s trading, the combined market capitalization of Samsung Biologics and Samsung Epis Holdings came to 93.7 trillion won, up roughly 6.8 trillion won from the pre-spinoff market cap of 86.9 trillion won.

Samsung Epis Holdings closed at 438,500 won on Monday, down 28.23 percent from its debut price. The decline is interpreted as the market wanting Samsung Bioepis to prove the potential of its portfolio of biosimilars, novel drugs and ADCs, with tangible results, as well as demonstrating how effectively Samsung Epis Holdings can function as a pharmaceutical investment platform.