By Yoon Ja-young
As Samsung BioLogics is preparing to make its debut on the bourse, the market watchers are wondering whether the pharmaceutical subsidiary of Samsung Group will trigger a bio and healthcare boom in the stock market. While it has the potential to be a blockbuster of the initial public offering (IPO) market, some analysts show concern that the timing doesn’t seem favorable as the sector is cooling down rapidly following the plunge of Hanmi Pharmaceutical.
Samsung BioLogics submitted its plan for listing to the Financial Supervisory Service and to the Korea Exchange (KRX), Monday. According to the plan, it will list 16.5 million shares at the desired price range of 113,000 and 136,000 won. After opening the subscription for the shares on Nov. 2 and 3, Samsung plans to complete the IPO by the end of the next month at the latest, raising between 1.87 and 2.25 trillion won through the IPO. It said that that money will be used to invest in production facilities and related businesses as well as paying back loans.
The company, which manufactures biologic drugs on contract to global pharmaceutical firms, has 52.1 percent of its stake held by Samsung C&T Corp. while 47.8 percent is owned by Samsung Electronics.
While it will likely be the third biggest fish in the IPO market following Samsung Life Insurance, debuted in 2010, and Doosan Bobcat, which is to be listed on Oct. 21, the outlook for the sector isn’t rosy.
Pharmaceutical and bio shares have been surging following Hanmi Pharmaceutical’s success stories, in which it signed a series of deals with global pharmaceutical companies to jointly develop and sell new drugs. The shares, which traded at around 100,000 won in March last year, surged over 500 percent to 620,000 won last month, pulling up other medical and pharmaceutical stocks with it. The pharmaceutical index of the junior, tech-heavy Kosdaq market, which doesn’t include Hanmi, rose over 40 percent during the period.
However, cancellation of the license deal on a lung cancer treatment with Boehringer Ingelheim came as a shock on investors. It closed at 457,000 won, Wednesday.
Analysts point out that pharmaceutical shares have been over evaluated. According to Daishin Securities, the price earnings ratio (PER) of pharmaceutical stocks stands at 37.73, much higher than on average 14.51 PER of KOSPI firms.
“Local pharmaceutical and bio firms had high evaluations, on expectations that they would make a quantum jump through new drugs. The cancellation will have a negative impact on healthcare,” said Seo Keun-hee,” an analyst at the brokerage.
The problem is that it will impact the whole industry. “New drugs have a low success rate in clinical tests. The cancellation of contracts or suspension of clinical tests is not something unusual for new drug developers,” said Kwak Jin-hee, an analyst at Eugene Investment. She pointed out that investors, however, are shocked.
“As local pharmaceutical and bio industries haven’t experienced the full cycle of the new drug development yet, the concern will be reflected notably.”