Biopharmaceutical stocks, which drew attention as Covid-19’s beneficiaries last year, seem to have been mired in a slump, as shown by declining share prices and dwindling market capitalization since September, analysts said on Friday.

Analysts and investors keep a close eye on whether the Omicron variant and the increase in Covid-19 cases will revive biopharmaceutical stock prices.
Analysts and investors keep a close eye on whether the Omicron variant and the increase in Covid-19 cases will revive biopharmaceutical stock prices.

Ironically, their slump mainly resulted from the rising inoculation rate in Korea and multinational pharmaceutical companies' development of oral treatments.

In an analysis of the November stock prices and market caps, only 19 of 152 listed pharmaceutical companies recorded a share price increase, indicating that about nine out of 10 pharmaceutical companies suffered share price declines. As a result, their market capitalization also decreased by 2 trillion won ($1.7 billion), from 187 trillion won to 185 trillion won last month.

The November market cap decline was less steep than October’s 16 trillion won but maintained the downward trend. Notably, 96 stocks saw their share prices drop by more than double-digit rates, and more than half of them suffered from sluggish stock prices.

Investors are paying attention to whether the sluggish biopharmaceutical shares will rebound with the emergence of the Omicron variant and the resurge of new virus cases after the government shifted to the "living-with-covid" system on Nov. 1.

Their expectations are based on the rise of overall biopharmaceutical stock prices after the emergence of the Delta variant. Especially, diagnostic kit makers showed strong growth last month with the surge in daily Covid-19 cases.

For instance, Seegene marked the sharpest monthly share price increase among the 152 listed biopharmaceuticals last month.

Seegene's stock price increased 37.4 percent from 55,100 won ($46.6) on Nov. 1 to 75,700 won on Nov. 30, and its market cap increased from 2.8 trillion won to 3.9 trillion won during the month.

Humasis also saw its share price rise 16.6 percent from 16,550 won to 19,300 won, and its market capitalization increased from 566.4 billion won to 660.5 billion won in November.

Investors believe that the stock price of diagnostic kits will continue to increase this month with the emergence of the Omicron variant.

However, an analyst advised that it is necessary to see which company's diagnostic kits can detect the Omicron variant. It is difficult for the existing diagnostic kits to confirm Omicron infection's presence immediately.

"The biggest problem is that it is not easy to determine the Omicron variant through a PCR test even with existing diagnostic or variant diagnostic kits," said Kang Ha-na, an eBest Investment & Securities analyst. "Since Omicron occurs in the S gene region, it is judged that the RdRp, E, and N region diagnostic kits used in testing for confirmed patients in Korea will be difficult to identify the Omicron variant."

Besides diagnostic kits, the share prices of contract manufacturing organization (CMO) companies, showing a steady upward trend after the Covid-19 pandemic, also stood out.

In the case of ST Pharm, the stock price rose 36 percent from 92,200 won on Nov. 1 to 125,400 won on Nov. 30, and during this period, the market cap was increased from 1.7 trillion won to 2.3 trillion won.

Shares of SK Bioscience rose 24.7 percent from 222,500 won at the beginning of November to 280,500 won at the end of the month, with its market capitalization increasing from 17.2 trillion won to 21.4 trillion won.

"While the overall stock market is on a downtrend, due to the recent spread of Covid-19 and the emergence of a new variant, biopharmaceutical stocks have enjoyed some increase in share prices," Lee Jun-soo, an analyst for Prophet Asset Management, told Korea Biomedical Review. "This was also observed during the emergence of the Delta variant earlier this year."

It is noteworthy to watch whether biopharmaceutical stocks, which have been weak for a long time, will turn bullish due to the Omicron variant and an increase in the number of confirmed cases, Lee added.

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