Korea’s IPO market gains steam amid global pandemic

SK Biopharmaceuticals Co. Ltd. made a strong market debut on the Korea Exchange, as the country's IPO market has been gaining steam with newly listed companies seeing an average 55.6 percent hike from their offering price during the first half of the year, according to Korea Exchange.

On July 2, SK Biopharmaceuticals doubled the price of its offering price of 48,000 won in its first trading day. It opened at 98,000 won per share and closed at 127,000 won, reaching the exchange’s daily limit of 29.59 percent and recording a 159.18 percent growth compared to the initial offering price.

On July 3, the company's shares hit the daily limit again surging 29.92 percent to 165,000 won per share. The company's market cap is valued at approximately 12.9 trillion won, ranking 22nd place on KOSPI.

Concerns about the company being overvalued will be inevitable if share prices continue to climb. SK Biopharmaceutical has been valued between five trillion won and 9 trillion won and the target share price set between 100,000 won and 110,000 won by financial firms.

SK Biopharmaceuticals is the biotech/pharma unit of Korea’s conglomerate SK Group. The company was the first domestic pharmaceutical to obtain approvals from the U.S. Food and Drug Administration for its original drugs.



The pharma company has attracted investors who have witnessed promising examples of large-cap bio/healthcare stocks such as Samsung Biologics and Celltrion. The successful track record of the two companies have made investors’ sentiment even more favorable towards SK Biopharmaceuticals.

For example, Samsung Biologics faced initial concerns over its growth potential and performance when it made its market debut in November 2016. However, its current price remains six times higher than its market debut price of 135,000 won per share.

“Samsung Biologics and Celltrion are the only large-cap bio stocks on the bourse which makes SK Biopharmaceuticals even more attractive for institutional investors who want to expand their portfolios into bio sector,” according to Samsung Securities analyst Keunhee Seo.

Also, SK Biopharmaceuticals’ growth potential is comparatively stable due to its portfolio of earning products which makes it easier to predict future revenue compared to other bio stocks making the company even more enticing.

Not to mention, the global coronavirus pandemic has also stirred up much interest in bio/healthcare stocks.

Despite brewing expectations, SK Biopharmaceuticals is expected to record less than 60 billion won in turnover this year with an operating loss of nearly 200 billion won. However, the company’s FDA-approved drugs will help to transition the company to surplus in three years.

“SK Biopharmaceuticals’ antiepileptic drug Xcopri and narcolepsy treatment drug Sunosi will account for surplus in 2023, and the company is expected to post over 800 billion won in operating profit in 2030,” according to Byunghwa Han, an analyst at Eugene Investment. He added that Xcopri in particular is expected to be a global blockbuster drug.

 

Write to Yunsang ko and Taeho Lee at kys@hankyung.com


 

(Updated on July 3, 2020 to include SK Biopharmaceuticals' market data from second day of trading.)