Healthcare Stocks, Have They Shaken Off Negative Factors and Caught a Rebound Signal?

KRX Healthcare Index Shows Highest Increase of 9% This Month
Healthcare Index Experienced Largest Decline from Last Year to End of February This Year

[Asia Economy Reporter Minji Lee] The healthcare index, which had been steadily declining, is now stretching its limbs by recording the highest growth rate this month. As concerns over interest rate hikes have eased and the accounting audit issue of major stock Celltrion has been resolved, most of the negative factors that had dampened investor sentiment are considered to have been cleared.

According to the Korea Exchange on the 21st, among the KRX indices, the healthcare index showed the highest growth rate this month, reaching 9%. The healthcare index had fallen about 44% over a period of more than a year from early last year to the end of February this year, showing the largest decline among all indices. However, it reversed to an upward trend this month, showing the largest increase.

As the negative issues related to Celltrion and HLB, which had adversely affected the healthcare sector overall, were mostly resolved this month, investor sentiment is interpreted to have significantly improved. The Celltrion Group recorded a sharp rise in stock prices over the past week after financial authorities announced that the nearly four-year-long accounting fraud controversy was due to “unintentional negligence.” Celltrion rose 7.65%, while Celltrion Pharm and Celltrion Healthcare surged 12% and 9.3%, respectively. The HLB group stocks also surged after receiving a “no charges” disposition on the 15th regarding allegations of unfair trading related to the anticancer drug “Rivoceranib,” which was raised by the Financial Supervisory Service investigation in May 2020. Over the past week, HLB rose 18%, and HLB Life Science (9%) and HLB Pharma (15%) also increased.

Kim Taehee, a researcher at KB Securities, said, “Not only the three Celltrion companies but also the overall sector’s investor sentiment is expected to improve,” adding, “The Securities and Futures Commission mentioned that accounting firms should refrain from being overly conservative in external audits of new businesses, so accounting issues in the pharmaceutical and bio industries, which have lasted more than three years, will no longer be considered negative factors for stock prices.”

Among major healthcare stock groups, expectations for reopening-related benefits are also positively influencing stock prices of companies related to Botox and fillers. Medytox’s stock price has risen about 6% in the past week, and Zetema also increased by about 11%. Last year, the aesthetic medical device industry grew by about 40%, reflecting the base effect of COVID-19. A researcher at KTB Investment & Securities said, “This year, growth of over 30% is expected due to increased demand for cosmetic procedures and new product launches,” adding, “Companies are beginning to actively sell mid- to low-priced products, showing rapid earnings growth.”

Furthermore, with academic conference events scheduled from next month through June, there is a possibility that investor sentiment toward healthcare companies involved in new drug development will further revive. Every year, starting with the American Association for Cancer Research (AACR), the American Society of Clinical Oncology (ASCO), the American Diabetes Association (ADA), and the International Association for the Study of Lung Cancer (IASLC) are held consecutively, and these academic events typically act as upward momentum for related stocks. Eom Minyong, a researcher at Hyundai Motor Securities, said, “Major conferences have been held online for the past two years, but AACR will be held face-to-face for the first time in three years on the 8th of next month,” adding, “As technology transfers, offline inspections, and face-to-face negotiations begin, a global biotech momentum is emerging.”