[Initial Moment] The Golden Age of Bio

[Asia Economy Reporter Song Hwajeong] These days truly mark the heyday of bio industries. The emergence of the novel coronavirus disease (COVID-19) this year has brought about many changes across society, and the stock market is no exception. The most prominent feature of this year's stock market, brought on by COVID-19, is the strong performance of pharmaceutical and bio stocks.

Samsung Biologics, the leading stock in the pharmaceutical and bio sector, recently surpassed SK Hynix to become the second-largest by market capitalization on the KOSPI, and the top six companies by market cap on the KOSDAQ are all bio stocks. While the KOSPI rose 11.69% since last February, the pharmaceutical index surged 76.42% during the same period, outperforming other sectors. Similarly, the KOSDAQ index increased by 30.17%, while the pharmaceutical sector rose by 77.23%. The KOSDAQ Technology Growth Companies sector, which includes many bio stocks, saw its stock price jump 92.35% over the same period.

Among the top 20 stocks with the highest price increases since February, 14 were bio and medical device companies. Shinpung Pharmaceutical Preferred shares rose the most, soaring 2607.36%. Shinpung Pharmaceutical common shares increased by 1626.11%, Access Bio by 1096.04%, Seegene by 703.32%, GeneOne Life Science by 523.2%, and Alteogen by 485.71%, all showing significant gains. Reflecting this surge, in the Morgan Stanley Capital International (MSCI) quarterly review held on the 13th, Seegene, Alteogen, and Shinpung Pharmaceutical were newly included in the Korean index. The proportion of pharmaceutical and bio stocks in market capitalization has also grown. On the KOSPI, the share of pharmaceuticals was 5.2% at the beginning of the year but expanded to 8.5% as of yesterday, while on the KOSDAQ, it increased from 11.5% to 15.4%.

Concerns about overheating due to the rapid rise are also growing. Of the 28 stocks designated as investment risk stocks from the beginning of this year through the 25th of this month, 20 were related to bio and medical devices. Access Bio was designated as an investment risk stock three times just this month.

In the second half of last year, the atmosphere around pharmaceutical and bio stocks was not favorable. This was due to negative factors such as the suspension and cancellation of approval for Kolon TissueGene's Invossa sales and delays in phase 3 clinical trials of major companies. The opportunity to reverse this atmosphere was provided by COVID-19. As humanity faced this infectious virus for the first time, the world was swept into an uncontrollable whirlwind, and stock markets worldwide plunged in panic during the early spread of COVID-19. Although the markets rebounded afterward, concerns about resurgence remain. Additionally, governments worldwide have been injecting funds and providing support, but the longer COVID-19 lasts, the greater the concerns about an economic crisis become. Given this situation, COVID-19 treatments and vaccines have emerged as the only hope, as the situation can only be resolved once treatments or vaccines are developed.

In the early stages of COVID-19, mask-related stocks and diagnostic kit stocks for COVID-19 testing received attention due to social distancing measures, followed by significant rises in stocks of companies developing treatments and vaccines.

While COVID-19 has created a favorable environment for pharmaceutical and bio stocks, it is especially important for investors to distinguish the wheat from the chaff during such times. SuzenTec, a diagnostic kit company, saw its stock plunge 23% after its second-quarter earnings fell short of market expectations. Although it has somewhat recovered since, it has yet to regain the 50,000 KRW level it held before the sharp drop. Similarly, stocks related to treatment and vaccine development have experienced significant volatility with every update on clinical progress, but no one can guarantee the outcomes. Even global pharmaceutical companies are racing to develop COVID-19 treatments and vaccines, and there is no assurance that domestic companies will achieve results beyond expectations. Investors should remember that rather than chasing stocks based on clinical progress news with emotional reactions, a cool-headed judgment and analysis are essential.