Samsung Biologics Leaps to 3rd Among Most Valuable South Korean Companies

Demand for Covid-19 therapeutics pushes sales to record highs

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Aug 12, 2020
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A nearly 60% spike in its share price over the past six months has vaulted Samsung Biologics Co. Ltd. (XKRX:207940, Financial) to number three on the list of South Korea's most valuable companies. With a market cap of about $45 billion, Samsung trails only fellow Samsung Group member Samsung Electronics Co. Ltd. (XKRX:0005930, Financial) and chipmaker SK Hynix Inc. (XKRX:000660, Financial).

Seoul-based Samsung Biologics' rapid run-up in share price reflects the record demand for its therapeutics related to Covid-19. The company is a contract manufacturer that produces biopharmaceutical products for companies that include Bristol-Myers Squibb Co. (BMY, Financial) and Roche (RHHBY, Financial), among others. In April, Samsung signed a $362 million agreement with Vir Biotechnology Inc. (VIR) to help scale manufacturing of Vir's monoclonal antibody program as a potential treatment for the coronavirus.

Vir will begin a clinical trial of its top antibody candidate later this month, hoping it can show that the drug is able to prevent hospitalization due to Covid-19, according to an article in STAT. The company's second antibody will start a clinical trial later this year. Both drugs are designed to bind to a location on the spike protein that creates a high barrier to resistance. In preclinical studies, the antibodies also recruit immune cells to help kill other cells already infected by the virus, Vir said.

Under terms of the pact, Samsung will start manufacturing as early as October with its first engineering run and potentially begin making commercial batches starting next year.

In May, Samsung inked an eight-year, $231 million deal with GlaxoSmithKline (GSK, Financial) to boost production of the Glaxo drug Benlysta. The first production run of the drug is expected to start in 2022, with the likelihood that the agreement will be expanded to include other Glaxo specialty care products.

The demand for Samsung's therapeutics has been overwhelming. In just the first half of the year, sales were $1.5 billion, up about 150% over what they sold in all of 2019. In the second quarter, net income climbed 42%.

To gear up to meet orders for products, Samsung is building a $2 billion "Super Plant" at its center in Incheon, South Korea. FiercePharma reported that it will be bigger than all three of the companies' other production facilities combined.

The company also said it is seeking to obtain an additional campus in Incheon that would become an "open Innovation center to foster biotech companies and build a global R&D facility in addition to securing space for future plants within the new complex."

Samsung trades at about $710 a share. According to Yahoo Finance, of the 11 analysts offering opinions, three rated it a strong buy, four a buy, three a hold and two an underperform. They set a high target price more than one-third below where the stock is at now, but that may be due to the ratings being offered before the recent spate of good news.

Disclosure: The author holds a position in Bristol-Myers Squibb.

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