BlackRock Expands Stakes in South Korean Biotech Firms

The world’s largest asset manager, BlackRock, has increased its stakes in major South Korean pharmaceutical and biotech companies to over 5% this year, signaling a reassessment of the K-Bio sector. The investments by BlackRock and other foreign funds in domestic biotech firms are interpreted as a shift towards selecting companies with strong cash flow generation potential, rather than merely betting on clinical success.

According to the Financial Supervisory Service’s electronic disclosure system and industry sources, BlackRock’s subsidiary, BlackRock Fund Advisors, and its affiliates have raised their stake in HLB to 7.15% and in Alteogen to 5.03%. They also increased their stake in Yuhan from 5.07% in June to 6.50% last month.

In the case of HLB, BlackRock raised its stake from 5.01% in March to 6.05% in June, and then to 7.15% at the end of last month, making it the second-largest shareholder after HLB Group Chairman Jin Yang-gon. Alteogen’s stake increased from 4.98% (2,670,175 shares) on July 30 to 5.03% (2,694,448 shares) the following day, qualifying it for a large shareholder report.

Other foreign asset managers are also expanding their stakes in domestic pharmaceutical companies. U.S.-based Copernic Global Investors has continuously purchased shares in Jongkundang, raising its stake to 8.38%.

The increase in stakes by foreign asset managers in South Korean pharmaceutical and biotech firms aligns with a trend of additional investments in companies that have achieved billion-dollar technology exports and global commercialization successes.

Yuhan is being highly regarded for its long-term growth potential, particularly due to the global commercialization success of its lung cancer drug, Lecraza, and the possibility of further technology exports. BlackRock’s consecutive stake increases in June and July reflect this optimism.

Alteogen has successfully transferred technology to GlaxoSmithKline (GSK) affiliates and Biogen, leveraging its human hyaluronidase platform, ALT-B4. The market views BlackRock’s acquisition of over 5% as a recognition of Alteogen’s technological capabilities and commercialization potential.

HLB is set to seek FDA approval for its bile duct cancer treatment, Liraglutide, next month. According to HLB, it recently held a late-cycle meeting with the FDA regarding the approval review for Liraglutide as a second-line treatment for bile duct cancer. The company reported that there were no significant disagreements during the review process, and no new review issues that could affect approval were raised, heightening expectations for approval. The late-cycle meeting is an official procedure to address remaining issues and discuss drug labeling and post-marketing compliance plans as the approval review nears completion.

However, the situation is different for another drug candidate in HLB’s pipeline. HLB’s U.S. subsidiary, Elevate Therapeutics, received a third complete response letter (CRL) from the FDA regarding its new drug application (NDA) for the combination therapy of Ribociclib and Camrelizumab. The CRL was due to identified issues during the cGMP inspection of the manufacturing facility by China's Hansoh Pharmaceutical. This has increased uncertainty regarding the timeline for entering the U.S. market. Some analysts suggest that BlackRock may view this third CRL as limited to manufacturing-related issues, indicating a possibility for resolution.

Kiwoom Securities noted, "Interest from foreign investors is expanding beyond mere expectations of clinical success to include companies that are undervalued or have a high potential for actual cash flow generation." However, they cautioned that "it is difficult to interpret the recent stake increases as a sign of active investment in K-Bio," suggesting the need to consider the potential for passive and index effects.