Need strong cost control for biopharmaceuticals in 2nd half

Park Byung-guk, researcher, bio sector outlook in the second half of 2023

Cost control becomes important

It was predicted that the pharmaceutical and bio sectors would continue their unstable trend in the second half.

 

It has emerged as the biggest challenge for small and medium-sized enterprises (SMEs) to withstand the harsh cold weather of the financial crisis through strong cost control.

 

In the second half of the year, if interest rates peak and good results are achieved in promising fields such as Alzheimer's disease, ADC, and cell genes, it is predicted that the lost fighting spirit will be restored.

 

Park Byeong-guk, researcher at NH Investment & Securities

Park Byeong-guk, a researcher at NH Investment & Securities, said at the '2nd Daily Family Day' held by Daily Partners, a bio-specialized venture capital (VC), on the 26th, "In 2021 and 2022, the pharmaceutical bio sector was hit hard by rising interest rates and the economic recession.

 

It was not included in the growth stocks in the first quarter of this year due to low market expectations,” he said.

 

Recently, stock prices of biopharmaceuticals, excluding some large companies, have fallen significantly.

 

According to researcher Park, the share of KOSPI pharmaceuticals and KOSDAQ pharmaceuticals is only 5.7% and 10.6%, respectively.

 

Compared to September 2020, the peak, decreased by 3.2%p and 5.3%p.

 

The global pharmaceutical bio also showed a similar trend.

 

The stock price growth rate of the top 10 S&P 500 healthcare companies has fallen since 2021, and on the contrary, the decline of the bottom 10 companies has increased even more.

 

In particular, it is analyzed that the decline was greater as the rise in interest rates had a great impact on the pharmaceutical bio sector.

 

As a result of the knock-on effect, investment in the biopharmaceutical industry has shrunk significantly.

 

In the first quarter of this year, US pharmaceutical and bio VC investments amounted to about US$ 3.7 billion, down 45% from the previous year.

 

Investments were made mainly by large VCs, and the proportion of small funds with less than $50 million showed a decreasing trend.

 

Domestically, the situation is more serious.

 

Researcher Park said, "The amount of investment in the fund in 2021 was about 1 trillion won, and a matching fund was made with this amount, but the size decreased to 500 billion won in 2022.

 

This year's budget is smaller." BDC) has been announced, but there is no way to open it yet, so the difficult situation continues.” As the risk increased, the issuance of mezzanines (CB, BW, EB), a major financing channel for biotechs, decreased.

 

As of the end of October 2022, the cumulative mezzanine issuance of domestic KOSPI and KOSDAQ pharmaceutical companies was 385 billion won, down 73% from the previous year.

 

It is expected that the unstable situation will continue in the second half.

 

Researcher Park said, "There is a higher probability of interest rate cuts in the third quarter of this year.

 

However, the economy is getting worse and worse, and there is still uncertainty as the worst situation can come out when prices are not set and interest rates cannot be lowered." This was reflected in growth stocks, but the bio sector was classified as a defensive stock and did not recover its fighting spirit." Anxiety in the biotech industry is rising.

 

An official from the biotech industry who attended the event said, "Biotechs have to face the second half right away, but I don't know how to really prepare to survive." Researcher Park said, “Survival of biotech companies has become the most important issue.” “At this point, cost control is the most important.

 

It can be done.

 

It is different from an investor's point of view.

 

Those aspects are seen very positively," he advised.

 

Researcher Park said, "Last year's Nasdaq bio sector IPO results were not good, but there was one company that drew attention among them.

 

It is a 4th-generation genetic scissors company.

 

There needs to be a lot of clinical data that can raise the market prospects like this." "Investor sentiment will be able to recover if positive news such as approval and ADC Enhertu's expansion of solid cancer indications and interest rate peak outs are added."