Will the Omicron variant give a boost to the rebound in biopharmaceutical stocks?

Biopharmaceutical stocks, which gained attention as beneficiaries of Covid-19 last year, appear to have been mired in a slump, as shown by declining stock prices and declining market capitalization since September, analysts said Friday.

Analysts and investors are watching closely whether the Omicron variant and rising Covid-19 cases will boost biopharmaceutical stock prices.

Ironically, their collapse was mainly the result of the rising rate of inoculation in Korea and the development of oral treatments by multinational pharmaceutical companies.

In an analysis of stock prices and market capitalizations for November, only 19 of 152 listed pharmaceutical companies recorded an increase in their share price, indicating that about nine out of 10 pharmaceutical companies suffered price declines. As a result, their market capitalization also declined by 2,000 billion won ($ 1.7 billion), from 187 trillion won to 185 trillion won last month.

November’s decline in market capitalization was less pronounced than October’s 16 trillion won, but continued the downward trend. Notably, 96 stocks saw their stock prices drop to more than double digits, and more than half of them suffered from sluggish stock prices.

Investors are wondering if sluggish biopharmaceutical stocks will rebound with the emergence of the Omicron variant and the upsurge in new cases of the virus after the government switched to the “live with the covid” system on November 1.

Their expectations are based on the overall rise in biopharmaceutical stock prices after the emergence of the Delta variant. In particular, manufacturers of diagnostic kits have shown strong growth in the past month with the surge in daily cases of Covid-19.

For example, Seegene recorded the largest monthly share price increase among 152 biopharmaceuticals listed last month.

Seegene’s share price rose 37.4% from 55,100 won ($ 46.6) on November 1 to 75,700 won on November 30, and its market capitalization rose from 2.8 trillion won to 3.9 trillion won during the month.

Humasis also saw its stock price rise 16.6 percent, from 16,550 won to 19,300 won, and its market capitalization fell from 566.4 billion won to 660.5 billion won in November.

Investors believe the stock price of diagnostic kits will continue to rise this month with the emergence of the Omicron variant.

However, an analyst has indicated that there is a need to see which diagnostic kits from the company can detect the Omicron variant. It is difficult for existing diagnostic kits to immediately confirm the presence of Omicron infection.

“The biggest problem is that it is not easy to determine the Omicron variant via a PCR test, even with existing diagnostic or variant diagnostic kits,” said Kang Ha-na, analyst at eBest Investment & Securities. “Since Omicron occurs in the S gene region, it is believed that the RdRp, E and N region diagnostic kits used to test confirmed patients in Korea will be difficult to identify the Omicron variant.”

In addition to diagnostic kits, the stock prices of contract manufacturing organization (CMO) companies, showing a steadily upward trend after the Covid-19 pandemic, also stood out.

In the case of ST Pharm, the stock price rose 36%, from 92,200 won on November 1 to 125,400 won on November 30, and during that period the market capitalization increased by 1,700 billion won to 2.3 trillion won.

SK Bioscience shares rose 24.7%, from 222,500 won at the start of November to 280,500 won at the end of the month, with its market capitalization increasing from 17.2 trillion won to 21.4 trillion won.

“While the overall stock market is on a downtrend, due to the recent spread of Covid-19 and the emergence of a new variant, biopharmaceutical stocks have seen some increase in stock prices,” Lee Jun -soo, analyst for Prophet Asset Management, told Korea Biomedical Review. “This was also observed during the emergence of the Delta variant earlier this year.”

It should be watched whether biopharmaceutical stocks, which have been low for a long time, will turn bullish due to the Omicron variant and an increase in the number of confirmed cases, Lee added.


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