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[News Focus] Fanfare for SK Biopharm stock debut, but should you invest?

SK Biopharmaceuticals` CEO Cho Jeong-woo
SK Biopharmaceuticals` CEO Cho Jeong-woo

SK Biopharmaceuticals’ imminent initial public offering on South Korea’s main bourse Kospi has the stock market excited. But is it really the right time to buy?

The global coronavirus pandemic has definitely given investors a moment to give a second look at previously-bypassed biologics stocks, and many who have never purchased any stocks are contemplating trying their chances.

But as SK Biopharmaceuticals’ CEO Cho Jeong-woo said at the online press event on Monday, just as he was vouching for the company’s 15-year-strong drive to research and develop central nervous system drugs, “the reception for (SK Biopharmaceuticals’) IPO is very upbeat, so much so that it is bewildering that the anticipation should be this high.”

Isaac Newton’s third law of motion states that for every action there is an equal and opposite reaction. And almost certainly in the pattern of investments, stock prices tend to spike up in speculation, before they slide back down to a reasonable range -- either on a gradual downward slope or a sudden, precarious drop.

There may be gains in bio investments, but at the same time, the unforeseen pitfalls that have haunted the investors of Kolon Life Science and SillaJen must not go forgotten.

“It seems that investors have nowhere else to go at the moment, and they are piling up on bio stocks, but frankly, we can’t understand our own stock market behavior right now,” said a biologics company official under anonymity, cautioning against inexplicable fluctuations.

Noticeably in the Korean biologics and pharmaceuticals sector, contract manufacturing organization Samsung Biologics’ shares jumped nearly 30 percent halfway through this month.

Samsung Biologics shares started at around 600,000 won ($497) range in the beginning of June, and are now hovering above 800,000 won as of Tuesday.

Biosimilars maker Celltrion also saw its shares climb, after news of its acquisition of global pharmaceuticals company Takeda’s Primary Care unit in the Asia-Pacific region.

The company, now preparing to take on both biologics drugs and chemical drugs market, has its stock price nearing the 300,000 won threshold once again.

SK Biopharmaceuticals is nonetheless an industry powerhouse and one of the bigger fishes in the water.

“It’s up to the investors to decide on the final offering price, and they ought to be reminded to make a level-headed, conservative appreciation of the SK BIopharmaceuticals share price,” said Hwang Se-woon, a senior researcher at Korea Capital Market Institute.

“Concerns for overheating in stock market is constantly being raised, which voice is being resonated by the government. When the market gets too hot, a regulatory adjustment is inevitable and there may be investors who incur unexpected investment loss,” Hwang cautioned.

SK Biopharmaceuticals is wholly owned by SK Group -- Korea’s third-largest conglomerate in 2020 after Samsung and Hyundai.

SK Biopharmaceuticals first began researching and developing novel drugs with unmet medical needs in the CNS drug department since 1993.

Recently, its efforts have put forth two consecutive victories in the form of solriamfetol and cenobamate’s sales permit by the US Food and Drug Administration.

Solriamfetol, whose brand name is Sunosi, treats obstructive sleep apnea, a condition that can cause cardiac arrest.

US firm Jazz Pharmaceutical in-licensed solriamfetol and developed it in later stages. It owes SK Biopharmaceuticals royalties for discovering the drug and developing it in its more primitive stages.

As for cenobamate, whose brand name is Xcopri in the US, the drug is an alternative treatment for adults with partial-onset seizures.

Xcopri has been recognized by the FDA for unprecedented efficacy in reducing the number of seizures in epileptic patients who have grown resistant to existing treatment options.

SK Biopharmaceuticals single-handedly developed the drug and will directly market it in the US, which guarantees it 100 percent proceeds from sales.

The preliminary pricing of cenobamate will be favorable and open to gradual increase for long-term business stability, the company said. It will launch in some 32 nations in 2021.

SK Biopharmaceuticals also boasts a CNS-specialized chemicals library of its own, with contents of around 30,000.

It has an artificial intelligence-driven discovery platform that aids it pinpoint promising pipelines.

Armed with seasoned experts Marc Kamin and Sebby Borriello from Johnson & Johnson among others, SK Biopharmaceuticals has full capabilities to carry out clinical trials by itself.

“We have researchers getting triple the salary I receive as a CEO,” said SK Biopharmaceuticals CEO Cho in a hearty remark.

Currently, SK Biopharmaceuticals is pursuing early-stage clinical trials of carisbamate for Lennox-Gastaut Syndrome, relenopride for rare neurological disease, SKL13865 for attention deficit disorder, SKL20540 for schizophrenia, SKL-PSY for biopolar disorder and SKL24741 for epilepsy -- in a differentiated approach from cenobamate.

SK Biopharmaceuticals has SK Bio-Pharm Tech in Shanghai, China, to serve as a bridge to the Chinese market. In the US, it has SK Life Science to carry out the direct marketing and sales.

By Lim Jeong-yeo (kaylalim@heraldcorp.com)
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