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The Korea Herald
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THE INVESTOR
June 25, 2024

Market Now

[From the scene] Is investment drought near end for Korean biotech?

  • PUBLISHED :June 15, 2023 - 09:29
  • UPDATED :June 15, 2023 - 09:29
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People lined up to register for the 2023 BIO International Convention at the Boston Convention and Exhibition Center in Boston, Massachusets, on June 5. (Park Han-na/ The Korea Herald)

Over 500 Korean companies and institutions gathered in Boston to take part in the BIO International Convention 2023 last week to discover new partnerships and to negotiate potential licensing deals.

The number of participating Korean biotech and pharmaceutical firms and agencies doubled this year from a year ago, the largest after those from the United States, raising anticipation for the industry which experienced investment drought last year.

“During this year’s event, multinational pharmaceutical companies apparently had the most meetings with Korean biotech companies ever. Foreign venture capital firms also showed a great interested in Korean firms’ technology,” said Hwang Ju-rie, public relations division director at Korea Biotechnology Industry Organization. The KBIO ran the Korea Pavilion at the exhibition to help Korean biotech companies promote their technology during the event.

It is a crucial timing for small Korean biotechnology firms to attract fresh funds as high borrowing costs and strong dollar have led the companies to reduce research and development expenditure and scrap their initial public offering plans. Retail investors who snapped up their shares during the pandemic also turned sour on the sector.

According to data from the Ministry of SMEs and Startups, venture capital firms' investment in the biotech and health care sector in 2022 reached 1.15 trillion won ($901 million), down 31 percent from 1.67 trillion won a year earlier.

Jung Soon-ouk, executive director at Korea Investment Partners, said recovery of the climate for biotech investing is unlikely “anytime soon,” echoing the view of other venture capitalists, who expect it to take another year to get back on track.

“Korean venture capital firms usually come to this event to discover new foreign portfolio firms. But not this time. Many of them seemed to have insufficient fund to make additional investment,” Jung said.

Outlooks for Korean contract development and manufacturing organizations such as Samsung Biologics, Lotte Biologics and Celltrion, are bright as they have enough liquidity back by their rich mother companies. But small biotech companies in clinical trials are continue to struggle to raise funds, he said.

“One of the signs that investors sentiment has not returned is that absence of big licensing deals that large pharma companies clinch to buy technology of biotech firms during this kind of huge event,” he said.

An accountant from Samil PWC Accountings, a slowdown in initial public offerings in the Korean biotech sector is continuing.

“But I think stagnancy is what the Korean biotech industry should go through to separate the wheat from the chaff," he said.

“I think the IPO market will still come back, and now the overall market situation is difficult rather than limited to the biotech industry.”

Meanwhile, Atinum Investment Senior Associate Noh Ae-rin said she believes the increased number of Korean companies in the event is a sign of industry recovery.

“Investment sentiment has improved in general. But funding tends to be concentrated on companies in the early or late stage of fund-raising,” she said. Some of Atinum Investment’s portfolio firms including antibody-drug-conjugates developer LegoChem Biosciences and gene therapy developer Bio Design Lab, set up booths at exhibition space of the event.

Seed or series A rounds are an easy sell at the moment, because it is easy for venture capitalist to adjust their valuation, according to Noh.

Those in pre-IPO stage are also attractive to investors because venture capitalist can expect quick investment return as their listing is imminent.

“Those in between (series Bs, Cs) are struggling as they need more money to do clinical trials and development which many investors want to shun at this moment,” she said.

By Park Han-na (hnpark@heraldcorp.com)

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