The author is an analyst of Shinhan Investment Corp. He can be reached at email@example.com. -- Ed.
Focus on biotechs with licensing deal momentum expected in 2020
Three biotech companies in our focus since March -- Peptron, Alteogen and LegoChem Biosciences -- have now undergone six to 12 months of verification through material transfer agreements (MTAs) sealed with global pharmaceuticals. While there are no guarantees that an MTA will lead to an actual licensing deal, the agreements are typically seen as a prerequisite with most licensing deals preceded by MTAs in the past.
Domestic biotech stocks have been faring well as of late on improvement in investor sentiment. With momentum from phase III clinical trials seen relatively limited this year compared with recent years, we recommend selectively focusing on biotech companies expected to see licensing deal momentum in 2020.
Favor in the following order: LegoChem Biosciences> Peptron > Alteogen
Considering the upside in share prices, LegoChem Biosciences is favored the most among biotechs in focus, followed by Peptron and Alteogen. LegoChem Biosciences has signed multiple MTAs with global pharmaceuticals. The company has also secured five licensing deals (worth KRW1.2tr in total) to date and is expected to win more than three technology transfer deals in 2020 from 10 potential platforms/products in the pipeline. We find the company's shares excessively undervalued at current price levels.