[Click eStock] "Pharmaceutical Stocks Must Increase Western Market and B2B Share to Withstand COVID-19 Fear"

Lower Impact from COVID-19 Means Higher Sales Share in Western Markets
Benefits Possible from Strong KRW-USD Exchange Rate... B2B and Essential Prescription Drug Shares Also Important

On the 26th, when the number of confirmed COVID-19 cases exceeded 1,000, access to Catholic University Eunpyeong St. Mary's Hospital in Eunpyeong-gu, Seoul, was restricted for visitors. The Seoul Metropolitan Government sent an urgent text message to Seoul citizens, stating that one more confirmed case related to Eunpyeong St. Mary's Hospital was reported the previous day, and at the hospital's request, visitors from February 1st to the present should contact their nearest public health center for medical guidance. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Minwoo Lee] As consumption contracts due to the impact of the novel coronavirus infection (COVID-19), the stock market continues to decline. In this situation, it is projected that when investing in pharmaceutical stocks, it is necessary to check whether sales are mainly focused on Western countries and whether the main products are essential prescription drugs centered on business-to-business (B2B) transactions.

On the 27th, Korea Investment & Securities emphasized that these factors should be considered when investing in the pharmaceutical and bio sectors.

First, it was stated that the proportion of sales in Western countries such as the United States and Europe, where exposure to COVID-19 is limited and damage is relatively low, should be high. Additionally, with the stock market instability causing a sharp rise in the won-dollar exchange rate, it was explained that the higher the proportion of export (dollar) sales, the more benefits can be expected.

It was also advised to check whether the sales items are B2B or essential prescription drugs. Jin Heung-guk, a researcher at Korea Investment & Securities, explained, "Recently, due to the COVID-19 situation, consumption has contracted, and damage is expected in consumer goods or B2C product sales," adding, "However, if the main customers are companies rather than consumers and the products sold are treatments for serious diseases that must be treated, the damage will be relatively less."

Korea Investment & Securities cited Samsung Biologics, Celltrion, and Celltrion Healthcare as stocks that meet these conditions. All three companies focus on sales in Western markets, and in the case of Celltrion Healthcare and Samsung Biologics, the proportion of overseas sales is close to 100%, so benefits from exchange rate effects are expected. Furthermore, since the handled products are based on essential prescription drugs, damage due to consumption contraction is also minimal.

Korea Investment & Securities gave a 'Buy' investment rating for all three stocks. The target prices were set at 540,000 KRW for Samsung Biologics, 210,000 KRW for Celltrion, and 81,000 KRW for Celltrion Healthcare.