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Why is biopharmaceutical outlook rosy, despite bubble concern?Korea’s healthcare industry now② Expectations and concerns mixed for biopharmaceutical sector
  • By Park Gi-taek
  • Published 2018.03.21 16:04
  • Updated 2018.03.21 16:04
  • comments 0

Celltrion Inc. and SillaJen are two representative pharmaceutical companies reflecting the expectations and concerns for the Korean biopharmaceutical industry.

Biopharmaceutical products are increasing their share in the local drugs market as they target specific patient groups with advanced biotech technologies such as genetic engineering and antibody technology.

According to the Ministry of Food and Drug Safety, the biopharmaceutical market rapidly grew from 800 billion won in 2006 to 1.8 trillion won in 2016. During the same period, the proportion of biopharmaceuticals in the entire medicines market also went up from 5.7 percent to 8.4 percent.

Clinical trials of biopharmaceuticals, which are barometers of new drugs, have also surged in recent years.

The number of clinical trials almost doubled from 106 in 2011 (51 in Korea and 55 in multiple countries) to 203 in 2015 (63 in Korea and 140 in multiple countries).

The nation’s output of biopharmaceutical goods grew from 1.73 trillion won in 2012 to 2 trillion won in 2016, with an annual growth of 3.8 percent on average.

In line with the robust growth of biopharmaceuticals, the sector is receiving active investments.

In 2016, the biotech and medical sector ranked first in the list of industries that received new investment from venture capital, beating the ICT (information and communications technology) that long held the No.1 position.

Venture capital’s new investment in the biotech and medical industry went up from 93.3 billion won in 2011 (7.4 percent) to 317 billion won in 2015 (15.2 percent). In 2016, the volume reached 468.6 billion won, taking up more than 20 percent of the total new investment by venture capital.

Between January to November in 2017, however, the sector attracted 318.9 billion won investment from venture capital. The biomedical sector ranked third as the ICT industry received the most investment and the retail/service sector, the second most.

Still, the biomedical sector is a major area attracting large-scale investments.

The government invested a total of 1.96 trillion won to support the development of novel drugs between 2010 and 2016. Ten percent of the government's investment went to the biopharmaceutical sector.

Biopharmaceuticals boost local stock market

The fast growth of the biopharmaceutical sector and anticipation for its growth potential has driven up the local stock market.

Out of the 92 KOSDAQ-listed biopharmaceutical firms, 65 or 70.7 percent enjoyed an increase in stock price last year. Shares of SillaJen, working on oncolytic virus treatment Pexa-Vec, have continued to rise since the initial public offering on December 6, 2016. The company’s stock price skyrocketed 605 percent for the past year.

Pexa-Vec, a representative investigational drug by SillaJen, is being tested in a global phase-3 study in patients with end-stage liver cancer. Under such circumstances, expanded indications of immunotherapy Opdivo (nivolumab) and clinical trials results of other existing anticancer drugs have boosted the stock price of SillaJen.

For example, after Amgen disclosed study results that its immunotherapy Imlygic doubled the response rate for patients with melanoma when combined with Yervoy (ipilimumab), SillaJen’s shares jumped.

SillaJen is trying out Pexa-Vec’s combinations with various anticancer remedies for solid cancer, breast cancer, and soft tissue sarcoma, besides end-stage liver cancer.

Celltrion, developer of the world’s first biosimilar Remsima, and its local marketer Celltrion Pharm saw their stock prices soaring by 156.1 percent and 105.9 percent, respectively, last year.

In 2016, the two companies’ shares rose 26.3 percent and 41.6 percent, respectively.
Celltrion Pharm, which saw the second-fastest climb in stock price after SillaJen last year, benefited from Chairman Seo Jung-jin’s comments on his plans to nurture generic drugs and sell them overseas.

However, some pharmaceutical sources raised concerns that bubbles exist in the biopharmaceutical sector.

They mentioned SillaJen as the typical case. The company’s stock price shot up more than 600 percent last year, making the firm rank third in KOSDAQ market cap. However, SillaJen is a new biopharmaceutical venture firm, with only 49 employees (43 at U.S. subsidiary) and 4.7 billion won accumulated sales. The company has not even released a product yet.

Considering that drugmakers can fail to commercialize a drug even during phase-3 clinical trials, SillaJen’s rapid market cap growth, solely based on expectations for a single drug candidate, might be excessive, observers said.

SillaJen’s stock price had a sharp rise from 22,200 won on Aug. 24 to 152,300 won on Nov. 21, driving up other shares of similar firms such as ViroMed (69.2 percent), Genexine (45.1 percent).

And Samsung BioLogics (42.8 percent), although there was no report of earnings growth or announcement of study results by those companies. The buying spree of pharmaceutical and biotech firms stemmed from some analysts’ forecast that a government agency would expand investment in KOSDAQ-listed companies.

Some industry watchers point out that expectations for biopharmaceuticals are excessive and that developers of major biopharmaceutical products are overrated.

Despite the concerns, Celltrion’s successful case is supporting a positive outlook for the biopharmaceutical sector.

When Celltrion was developing Remsima, the company faced similar worries about a possible bubble. However, Celltrion eventually obtained approval for the biosimilar drug in Europe and the U.S. and started selling the treatment there. The company is now considered as a major pharmaceutical firm in Korea.


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