'9% Surge' Samsung BioLogics Nears 700,000 Won Recovery

[Asia Economy Reporter Koh Hyung-kwang] Samsung Biologics (Samsung Bio) stock price surged sharply for the first time in a while, approaching the 700,000 KRW mark. The stock price rose significantly on news that the U.S. pharmaceutical company Pfizer's development of the novel coronavirus (COVID-19) vaccine has entered its final stages. Its market capitalization surpassed LG Chem to rise to 4th place.

According to the Korea Exchange on the 29th, Samsung Bio closed at 697,000 KRW on the KOSPI market the previous day, up 9.4% from the previous trading day. Samsung Bio's stock price showed a steep upward trend, surpassing 700,000 KRW for the first time in June and soon exceeding 800,000 KRW. However, after a period of sideways movement, it fell back to the 600,000 KRW range earlier this month. With the sharp rise the previous day, its market capitalization reached 46.117 trillion KRW, overtaking LG Chem (45.9556 trillion KRW) to become the 4th largest on the KOSPI by market cap.

Foreign and institutional investors bought Samsung Bio shares worth 25.6 billion KRW and 22.3 billion KRW respectively the previous day, pushing up the stock price. The buying frenzy appears to be driven by expectations of orders for COVID-19 vaccine contract manufacturing. Related stocks surged collectively on news that Pfizer, jointly developing the COVID-19 vaccine with Germany's BioNTech, has entered the final stage. Samsung Bio is a global top company in the contract manufacturing organization (CMO) sector.

Opening a contract development organization (CDO) research and development (R&D) center in San Francisco, USA, and launching a global expansion effort also seems to have acted as a positive factor. It is evaluated as having increased geographic accessibility for overseas clients and laid the groundwork for market expansion. Samsung Bio plans to implement a new business model linking research (CRO), development (CDO), and production (CMO) through this.

Its performance continues to show a favorable trend. In the third quarter of this year, sales increased evenly across plants 1, 2, and 3, with revenue rising 49% year-on-year to 274.6 billion KRW and operating profit increasing 139% to 56.5 billion KRW. Samsung Bio's cumulative sales and operating profit for the first three quarters (January to September) of this year have already surpassed the full-year results of last year. The securities industry expects the strong performance trend to continue in the fourth quarter due to improved cost ratios from increased utilization rates at plant 3.

Kim Ji-ha, a researcher at Meritz Securities, said, "Samsung Bio's fourth-quarter sales are expected to increase 7.4% from the previous quarter to 294.9 billion KRW, and operating profit is expected to rise 22.7% to 69.3 billion KRW," adding, "The effect of the surge in CMO contract orders in the second quarter will begin to fully appear from the second half, entering a phase of earnings growth in the fourth quarter of this year."