April 19, 2024

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[THE INVESTOR] Shares of Samsung BioLogics will be offered for sale to interested investors on Wednesday and Thursday, as the South Korean contract drug manufacturer prepares to go public on Korea’s main bourse Kospi on Nov. 10.

South Korean contract drug manufacturer has priced its shares at 136,000 won ($118.83) apiece. This pricing scheme values the share sale at 2.25 trillion won and sets Samsung BioLogics’ market value at 9 trillion won.

 

Samsung BioLogics` lab in Songdo, Incheon. Samsung BioLogics

Samsung BioLogics is offering 25 percent of the company’s ownership, comprising of 11 million newly issued shares and 5.5 million existing shares owned by Samsung Electronics, as part of its initial public offering.

Of this, around 20 percent of the shares are being offered for subscription by individual investors on Wednesday and Thursday, according to Samsung BioLogics. Another 60 percent has been offered to institutional investors over the same two-day period.

The remaining 20 percent is being offered to Samsung BioLogics employees for one day on Wednesday, the firm said in a regulatory filing.

The Samsung-based biopharma CMO is expected to raise around 1.5 trillion in fresh capital through the IPO, and fund the continued expansion of its own business as well as that of its subsidiary Samsung Bioepis.

Samsung BioLogics and Samsung Bioepis stand at the center of Samsung Group’s push into new, promising industries that could ensure the tech conglomerate’s sustained growth in the future.

The former, founded in 2011, is a contract manufacturer of biologic drugs developed by global pharma companies. The latter, established as a subsidiary of Samsung BioLogics in 2012, develops biosimilars, or near-replicas of complex biologic drugs that have lost patent protection.

The IPO is geared to fund Samsung BioLogics’ plans to continue building additional production plants with hope of becoming the world’s biggest contract manufacturer of biologic drugs.

Samsung BioLogics currently operates two plants which produce commercial biologics ordered by its clients Bristol-Myers Squibb and Roche. The completion of the third plant in 2018 will drive up the firm’s net production capacity to 360,000 liters, the biggest in the business globally.

BioLogics’ public listing will also provide a financial boost to Samsung Bioepis which is working on commercializing biosimilar drugs referencing some of the world’s top-selling biologic drugs against rivals.

Market expectations for Samsung BioLogics appear higher than ever, as evidenced by the firm’s offering price of 136,000 won, which sits at the upper end of the initial marketed price range.

However, some analysts have raised concerns about overvaluation, pointing out that Samsung BioLogics’ current value — fueled by rosy expectations for the firm’s future profitability — may be inflated.

“Samsung BioLogics’ IPO price is based on uncertain variables, such as the production capability of the firm’s third plant which is still under construction,” said one local analyst who wished to remain anonymous.

eBEST Investment & Securities analyst Shin Jae-hoon pointed to Samsung BioLogics’ poor profitability records and uncertainty over the order volume that the Korean biopharma CMO can score from clients in the future.

“The fact that Samsung BioLogics has been in the red, despite its production capabilities, is proof that it may not have secured sufficient orders,” Shin said.

“The company’s high valuation reflects uncertain expectations that the firm’s order-based production volume will increase, signaling risks,” he added.

Samsung BioLogics has explained that only its first plant is fully operational and that its larger second plant is still in its test operation stages, meaning that commercial drug production has yet to begin there.

By Sohn Ji-young/The Korea Herald (jys@heraldcorp.com)