UPDATE : Thursday, July 9, 2020
Biotech stocks could be overpriced: analysts
  • By Nam Doo-hyun
  • Published 2018.04.19 13:34
  • Updated 2018.04.19 13:34
  • comments 0

Analysts are warning investors that biotech shares could be overpriced, as stock prices of such firms went down despite a rise in KOSPI recently.

Most of pharmaceutical and biotech companies on the main bourse KOSPI and the secondary KOSDAQ suffered stock price declines on Wednesday.

Except for Boryung Pharmaceutical’s 1.79 percent gain and Reyon Pharmaceutical’s 0.39 percent rise, other drugmakers suffered losses on KOSPI.

On KOSDAQ, only Kangstem Biotech, Medytox, and CHA Biotech went up by 5.11 percent, 3.33 percent, and 2.35 percent, respectively, on Wednesday from the previous day.

Among pharmaceutical and biotech shares, Anterogen and Oscotec had the biggest daily drop, with stock prices plunging 21.24 percent and 11 percent, respectively.

“We had some positive aspects before the opening of the stock market (on Wednesday), and we had internally expected that our shares would go up on the day. There was no issue for a drop, but the stocks are falling a lot unexpectedly. We feel frustrated,” an official at a drugmaker said.

Analysts warned that small- and medium-sized biopharma bubbles could burst in the end.

“With the government’s KOSDAQ-boosting measures implemented, investors had more anticipation for the growth of small caps,” said Han Byung-hwa, an analyst at Eugene Investment & Securities, in a Wednesday report. “As the KOSDAQ rose to a certain level on the back of overheated shares of biotech firms, however, biotech shares are not likely to maintain the high level of stock prices for the long term.”

A burst of bubbles in biotech stocks could become a social controversy. So, the regulators should manage the sector more meticulously, he said.

According to Han, 80 percent of the top 30 listed firms with the highest price gains since November were biotech companies. That said, the biotech industry might be overvalued, he said.

“The party is nearing the end. Now, investors should switch to small- and medium-sized shares in sound growth in non-biotech sectors. Venture firms do exist in non-biotech sectors, too,” Han added.

Another analyst, who wished to be unnamed, agreed with Han’s view that small- and medium-sized biotech shares had bubbles.

“Recently, there has been a tendency that a biotech share rose simply because of the firm’s market entry, or a start of a clinical trial, or a news report on a drug’s efficacy in pre-clinical trials,” the analyst said. “If we compare local biotech ventures with its U.S. peers on NASDAQ, we know what’s going on. Han said the right thing in his report.”


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