Korea’s smaller pharmaceuticals like JW Pharmaceutical and Yungjin Pharmaceutical emerged as investment alternatives to investors betting on biopharmaceutical prospects after their large-cap counterparts with blockbuster deals last year failed to keep up the momentum in the first quarter.

According to the Korea Exchange (KRX) on Sunday, the KRX healthcare index that measures the sector performance fell 0.4 percent for the first 20 days this month, while JW Pharmaceutical gained 32.0 percent or 39,850 won to 52,600 won and Yungjin Pharmaceutical jumped by 91.9 percent from 8,000 won 15,350 won. This means investors shifted their focus on small and medium pharma stocks as large players such as Hanmi Pharm (-4.5 percent) and Celltrion (-6.7 percent) posted weak earnings due to increasing R&D costs in the first quarter.

Yungjin Pharmaceutical saw its stock price surge on expectations that the ongoing merger with KT&G Life Sciences will bolster its pipeline of new drugs. The stock price almost doubled from news that Yungjin Pharmaceutical decided to combine itself with KT&G Life Sciences. The main driver of the gain is KT&G Life Sciences’ investigational drug to treat MELAS Syndrome. Analysts say a clinical study will be conducted after the integration of two companies is completed.

JW Pharmaceutical gained on expectations of its possible license deal over its investigational drug combined with robust first-quarter earnings. On May 2, JW Pharmaceutical said in a statement that it conducted a phase I study of CWP291, an investigational drug to treat acute myeloid leukemia and it is working on data analysis. CWP291 is a targeted cancer therapy that inhibits signaling pathways related to cancer growth and cancer stem cells.

The company said it will seek to license out the drug based on phase I study results. The pharmaceutical also company said its first-quarter sales rose 12.3 percent on year to 119.2 billion won and operating profit soared 32.9 percent to 7.6 billion won. The positive results were driven by upbeat sales of hyperlipidemia drug Livalo and other key products as well as cost-saving efforts.

However, critics say Yungjin Pharmaceutical’s stock price is overly high given its price/earnings ratio (PER) that stands at 780 times. The corresponding figure of the peer industry stocks averages 44 times. Critics also say investors should be cautious about jumping into the market because the NASDAQ biotech index, a guidance index for Korean pharma stocks, slid 23 percent this year.

By Kim Tae-joon

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]