[COVID-19 Vaccine Stock Analysis] KPX Saengmyeong Science Unrelated to Pfizer Vaccine... Only Major Shareholder Hits 'Jackpot'

Global Supplier of Active Pharmaceutical Ingredients and Drug Intermediates to Major Pharma Companies

Stock Price Surges Due to Pfizer-Related Shares Despite No Connection to Delivered Products

Major Shareholder KPX Holdings Sells 20% Stake, Securing Approximately 90 Billion KRW

Recently, news about the development of vaccines for the novel coronavirus infection (COVID-19) has been emerging from various places. American pharmaceutical companies Pfizer and Moderna announced that their respective COVID-19 vaccines showed 95% immunity effectiveness in Phase 3 clinical trials. This news excited people worldwide who were exhausted by COVID-19. Expectations grew that the world could return to the pre-COVID-19 pandemic era. These expectations were also reflected in the stock market. Global stock markets have continued to rise daily, buoyed by prospects of economic recovery. In the domestic stock market, especially, the stock prices of companies grouped as Pfizer and Moderna-related stocks surged sharply. The reasons these companies were grouped as related stocks vary. Some seem reasonable, but others are somewhat questionable. Accordingly, Asia Economy conducted an in-depth analysis of KPX Life Science, AB Pro Bio, and Somagen, among the 'COVID-19 vaccine-related' companies recently attracting attention in the domestic stock market.

[Asia Economy Reporter Jang Hyowon] KPX Life Science's stock price surged as it was grouped as a 'Pfizer-related stock.' This was due to news that American pharmaceutical company Pfizer developed a COVID-19 vaccine and KPX Life Science supplies products to Pfizer. However, it was confirmed that the products KPX Life Science supplies have no relation whatsoever to Pfizer's vaccine.

As KPX Life Science's stock price surged due to the Pfizer issue, KPX Holdings, the largest shareholder of KPX Life Science, disposed of more than 20% of its shares, securing about 90 billion KRW.

Unrelated to COVID-19 Vaccine

KPX Life Science is a company that supplies active pharmaceutical ingredients and pharmaceutical intermediates to global pharmaceutical companies. As of the end of the third quarter, it recorded cumulative sales of 19.6 billion KRW and an operating loss of 500 million KRW. Compared to the same period last year, sales decreased by 32.9%, and operating profit turned to a loss.

The main product is 'AMZ,' used as a herbicide raw material in the United States, accounting for 41.2% of total sales as of the end of the third quarter. The remaining sales come from the sale of pharmaceutical intermediates used in antibiotics, contrast agents, and antidepressants.

The product of KPX Life Science that attracted attention due to the Pfizer vaccine issue is 'EDP-CL.' EDP-CL is used as an intermediate for an antibiotic called 'piperacillin.' Since 1993, KPX Life Science has supplied this product to a company called Wires, and after Pfizer acquired Wires in 2009, it began supplying Pfizer.

EDP-CL is used as an intermediate for antibiotics that treat bacterial infections and is completely unrelated to viral diseases like COVID-19. Antibiotics act only on bacteria, not viruses. In fact, the World Health Organization (WHO) recommends not using antibiotics as a preventive or treatment method for COVID-19. Moreover, EDP-CL sales have been declining since 2010. Sales of EDP-CL, which were 12.4 billion KRW in 2009, sharply dropped by 54% to 5.7 billion KRW in 2010. This year, sales amounted to only 1.6 billion KRW up to the third quarter.

The decline in EDP-CL sales is analyzed to be due to Pfizer changing its inventory policy after acquiring Wires. A KPX Life Science official stated, "The only product supplied to Pfizer is EDP-CL," and "There have been no additional orders from Pfizer related to the COVID-19 vaccine beyond the current transactions."

KPX Holdings Secures 90 Billion KRW Through On-Market Sales

While KPX Life Science was receiving market attention as a Pfizer-related stock, its largest shareholder, KPX Holdings, sold shares at a high price.

On November 13, KPX Holdings sold 3,288,471 shares (21.9%) on the market. Previously, KPX Holdings held a 51.9% stake in KPX Life Science.

KPX Life Science recorded consecutive daily limit-up prices for three trading days starting November 9. On the 13th, the stock surged 23%, but KPX Holdings sold about 2.78 million shares at once, causing the stock to close down 15%. Investors who bought at the peak suffered a 38% loss in a single day.

The average selling price per share by KPX Holdings was around 27,200 KRW, estimated to have secured 89.4 billion KRW. Considering that KPX Life Science's stock price was in the 10,000 KRW range before the surge due to the Pfizer issue, KPX Holdings was able to earn about 50 billion KRW more thanks to being grouped as a related stock.

More than half of the money KPX Holdings earned from selling KPX Life Science shares is expected to be distributed as dividends to the owner family. A KPX Life Science official explained, "KPX Holdings originally held more than 60% of the shares but started selling some shares gradually from August as the stock price rose," adding, "It was a simple profit realization."