Credit ratings for Samsung Biologics·JW Holdings↑

Handok·Dong-A ST↓…disparities among biopharma companies

Samsung Biologics received 'AA- positive' to 'AA stable' rating…JW Holdings 'BBB-'→'BBB'

Handok received downward adjustment from 'BBB+' to 'BBB'…Dong-A ST's credit rating downward by one grade

"It will continue to be polarized in the second half of the year, depending on exports·new products"

Major pharmaceutical and biotech companies (biopharma companies) are facing varying differing credit ratings and outlooks.

 

While Samsung Biologics and JW Holdings received upward credit ratings, Handok was downgraded.

 

Dong-A ST's credit rating outlook shifted from 'stable' to 'negative'.

 

Credit rating agencies explained that these results to differences in individual company performance and profitability.

 

They anticipated that the disparities among companies will become even more pronounced in the second half of the year.

 

Credit rating adjusted upward for Samsung Biologics and JW Holdings...

 

attributed by improved performance & stable profitability According to industry sources on the July 8, Korea Ratings·Korea Investors Service (KIS) recently upgraded Samsung Biologics' credit rating and outlook from 'AA- positive' to 'AA stable'.

 

Korea Ratings also raised JW Holdings' rating by one grade, from 'BBB- positive' to 'BBB stable'.

 

Samsung Biologics' stable profitability and expanding global orders were reflected in its evaluation, while JW Holdings' recovery in pharmaceutical business profitability and improved financial structure were reflected.

 

In contrast, credit ratings·outlooks for Handok and Dong-A ST were adjusted downward.

 

KIS adjusted Handok's credit rating downward by one grade from 'BBB+' to 'BBB', while converting its outlook from 'negative' to 'stable'.

 

Sluggish performance and increased financial burden were cited as the primary reasons for the credit rating downgrade.

 

Credit rating for Dong-A ST was maintained, but the company's outlook was downgraded.

 

NICE Investors Service kept Dong-A ST's credit rating at 'A+' but adjusted its outlook from 'stable' to 'negative'.

 

Korea Ratings also changed Dong-A ST's outlook to negative.

 

This is analyzed as a result of a complex interplay of factors, including slowing profitability and the burden of research and development (R&D) costs.

 

Other major biopharma companies maintained their existing credit ratings and outlooks.

 

According to Korea Ratings, Chong Kun Dang's credit rating and outlook remained 'AA- stable' as of the end of the first half, identical to the end of last year.

 

Chong Kun Dang Holdings, Green Cross, and Daewoong Pharmaceutical maintained 'A+ stable', while Dong-A Socio Holdings, HK inno.N, and Boryung held 'A stable'.

 

ISU Abxis remained at 'BB- stable', and Korea Union Pharmaceutical stayed at 'CC negative'.

 

KIS and NICE Investors Service also maintained the credit ratings and outlooks of Green Cross Holdings·Chong Kun Dang Holdings·Chong Kun Dang·HK inno.N·Dong-A Socio Holdings·SK Plasma·ISU Abxis·Vivacell Biotechnology at last year's levels.

 

Upward·downward credit rating adjustments·outlook by companies..."It will become more polarized in the second half of the year" Overall, while the fluctuation in credit ratings·outlooks for biopharma companies was not significant, individual companies experienced mixed fortunes depending on their business structure and financial response capabilities.

 

Combined Sales and R&D Spending Trends by Year-High R&D expenditure burden puts pressure on profitability (legend: sales (left), R&D ratio (red line, %), operating profit (blue line, %)

Credit rating agencies assessed that while companies successful in external growth and profitability improvement received upward credit ratings, some pharmaceutical companies highly dependent on the domestic market are accumulating factors that burden their credit rating.

 

Korea Ratings assessed, "In the first half, strong exports and new product launches drove overall external growth in the biopharma industry, but profitability improvement was limited due to increasing R&D costs," and added, "By companies, clear performance differentiation is observed based on the presence of high-margin products, the extent of market share secured, the scale of new business investments, and the ability to control R&D costs." This trend is expected to continue into the second half of the year.

 

Notably, new drug development and overseas expansion are projected to have a significant impact on corporate performance.

 

An analysis suggests that the disparity between companies could widen further, depending on the expansion of export proportions, new drug development achievements, and the pursuit of new business opportunities.

 

In particular, the growth momentum in the biopharma sector, including Contract Development and Manufacturing Organization (CDMO), is expected to continue.

 

Korea Ratings predicted, "New drug development, biosimilar growth, and the increasing outsourcing demand from global pharmaceutical companies will drive the growth of the CDMO industry."

Combined Borrowings and Coverage Trends-Increased capital requirements expected to drive up borrowings (Legend: Net Borrowings (dark blue, Unit: KRW 100 million), Net Borrowings/EBITDA (orange line, %), Based on Combined performance of 7 companies with our credit ratings, Source: Industry data compilation, estimate from Korea Ratings)

Key variables for the second half of the year were identified as 'control over financial stability and the U.S.

 

pharmaceutical trade policy.' The explanation was provided that "the performance gap could widen further depending on how stably companies control their profitability and financial structure" in a situation where R&D burdens are expanding and the business environment is rapidly changing.

 

Concerns also arise that "if the competitiveness of flagship products weakens or investment recovery is delayed, credit rating burden could increase due to deteriorating cash flow." Furthermore, if the U.S.

 

applies tariffs to imported pharmaceuticals, a negative impact on the exports of generics and biosimilars by domestic biopharma companies is anticipated.

 

In response, credit rating agencies advised, "Each company should strengthen its product portfolio and manufacturing competitiveness to review its response strategies."