Passing High Interest Rates and Large-Scale Technology Exports... Bio Stocks 'Smile'

KOSPI Pharmaceutical Index Up 15% in One Month
Sector with Poor Stock Performance Shows Rebound Trend

Biotech stocks are showing a fierce rally in the fourth quarter. Signals that the high interest rate era is coming to an end continue to emerge, along with news of large-scale technology exports, improving investor sentiment.

The KOSPI Pharmaceuticals Index closed at 13,597.52 on October 27, up from 11,835.88 on October 23. During the same period, the KOSDAQ Pharmaceutical Index also closed at 8,300.45, up from 6,971.51. The increase rates were 14.88% and 19.06%, respectively.

The rise in individual stocks was also significant. During the same period, Celltrion rose from 140,600 KRW to 189,800 KRW, Hanmi Pharm increased from 268,830 KRW to 340,000 KRW. Additionally, HLB went up from 28,600 KRW to 50,900 KRW, Alteogen from 55,400 KRW to 96,700 KRW, and ABL Bio from 16,350 KRW to 24,450 KRW, showing strong upward trends in most biotech stocks.

The sharp rise in biotech stocks in the fourth quarter is interpreted as due to expectations that the high interest rate era will end. The Federal Reserve (Fed) is expected to lower interest rates starting next year as inflation slows down.

Biotech companies are heavily affected by interest rates because most of their revenue comes from technology exports through new drug development. In other words, since they often lack steady revenue, they frequently raise funds by issuing convertible bonds (CBs) and other instruments. Therefore, lower interest rates act as a positive factor for biotech companies in terms of capital attraction.

Lee Dong-geon, a researcher at SK Securities, said, "Interest rates, which had suppressed biotech stock prices, are turning downward. There is a stronger tendency to invest in high-risk assets, and rebounds are appearing mainly in sectors within growth stocks that had underperformed."

Moreover, the JP Morgan Healthcare Conference (JPMHC), held from January 8 to 11 next year (local time) in San Francisco, California, USA, is also considered a positive factor. JPMHC is the world's largest healthcare event, inviting promising biotech and healthcare companies worldwide every year to introduce new technologies and corporate business strategies. Since it gathers personnel from various related industries worldwide, discussions on technology exports, mergers and acquisitions (M&A), and investments are actively conducted, attracting significant investor interest.

Recently, LegoChem Biosciences' success in a large-scale technology export has also contributed to improving investor sentiment. On the 22nd (local time), LegoChem Biosciences succeeded in exporting antibody-drug conjugate (ADC) technology worth up to $1.7225 billion (approximately 2.238 trillion KRW) to Janssen Biotech, a subsidiary of Johnson & Johnson (J&J). Following this news, LegoChem Biosciences' stock price rose from 46,950 KRW on the 20th to 61,100 KRW on the 27th.

However, despite these positive factors, the securities industry advises selective investment in biotech stocks rather than indiscriminate investment. Wi Hae-joo, a researcher at Korea Investment & Securities, said, "Although there is an inverse correlation between interest rates and biotech stock prices, a selective approach based on momentum and individual company fundamentals is necessary. This is because the financial risks of some domestic companies could potentially spread to the entire biotech sector."