[Edaily Reporter KIM SUNG-JIN ] Interest is mounting in the reasons behind BlackRock, the world’s largest asset management firm, expanding its investments in South Korean pharmaceutical and biotech companies. BlackRock first emerged as an investor in the South Korean pharmaceutical and biotech sector at least 10 years ago, drawing industry attention when it held more than a 5% stake in Yuhan Corporation.

While some in the industry speculate that this could be passive investing—where stocks are bought and sold mechanically based on index fluctuations—the general sentiment is positive regarding the fact that a foreign institutional investor has increased its investment in domestic pharmaceutical and biotech companies despite challenging conditions. However, given past instances where investments in domestic pharmaceutical companies resulted in losses, it remains to be seen whether the domestic pharmaceutical and biotech industry can capitalize on this expansion of investment.

Increased Investment in Yuhan Corporation… Tied to the History of “Lecraza”

According to industry sources on the 12th, BlackRock Fund Advisors, a fund subsidiary operated by BlackRock, disclosed on the 10th that it had increased its stake in Yuhan Corporation from 5.07% to 6.50%. Yuhan Corporation’s stock price rose for several consecutive days both before and after BlackRock’s acquisition of the stake. The stock price rose for seven consecutive trading days from the 3rd to the 11th, climbing from 73,500 won to 85,600 won. However, on the 12th, it closed at 83,600 won, down 2.92% from the previous trading day.

This is not the first time BlackRock has invested in Yuhan Corporation. According to past records, it also acquired a stake of more than 5% in Yuhan Corporation in 2015, emerging as a major shareholder at that time. At that time, Yuhan Corporation replaced its CEO for the first time in six years, appointing President Lee Jeong-hee (currently Chair of the Board of Directors) as the new CEO. Subsequently, Yuhan significantly increased its investment in research and development (R&D) and began shifting its focus in earnest from generic drugs to the development of new drugs.

At the time, President Lee Jeong-hee emphasized that the transformation into an R&D-focused company was an inevitable choice, stating, “Although the high cost of clinical trials is a concern, I believe this is the direction Yuhan must take.”

It was also in 2015 that the technology transfer for Lecraza (generic name: lazertinib), a third-generation targeted anticancer drug for lung cancer that served as the springboard for Yuhan Corporation’s leap toward becoming a global new drug developer, took place. Yuhan Corporation acquired the technology from Oskotec and Genosco during the early development stages, proceeded with clinical development, and successfully exported the technology to Janssen, a subsidiary of Johnson & Johnson (J&J), in 2018. Lecraza is the first anticancer drug developed by a Korean pharmaceutical company to receive approval from the U.S. Food and Drug Administration (FDA). Currently, J&J is utilizing Lecraza in combination with the bispecific antibody anticancer drug Librivant (active ingredient: amivantab).

Yuhan Corporation posted an operating profit of 66.9 billion won in the second quarter of this year, a 34.1% increase compared to the same period last year, and Lecraza played a major role in achieving this strong performance. This result reflects a milestone payment of approximately $30 million following the launch of Lecraza in Europe. As sales of Lecraza expand globally—starting in the U.S. and extending to China, Japan, and Europe—Yuhan Corporation’s royalty revenue is expected to gradually increase. The royalty rate for Lecraza is reported to be 10–12%, and securities analysts project that Yuhan Corporation’s royalty revenue from Lecraza alone will reach approximately 50 billion won this year.

Is

It Passive Investing… or a Sign of a K-Bio Revaluation

? Various interpretations of BlackRock’s latest investment are emerging within the industry. While some observers suggest that overseas institutional investors made the investment because they judged the stock prices of domestic pharmaceutical and biotech companies to be undervalued, others argue that the possibility of a simple, mechanical passive investment should not be ruled out.

Heo Hye-min, an analyst at Kiwoom Securities, said, “Since BlackRock manages a massive amount of ETF and index funds, we need to consider the possibility of passive investing and index effects,” but added, “However, looking at the companies they’ve invested in, we can glimpse a shift in foreign investors’ perspectives on K-Bio.”

In the case of Yuhan Corporation, it is reported that its investor relations (IR) team has recently been actively conducting non-deal roadshows (NDRs) for overseas investors. A Yuhan Corporation official said, “We are making efforts to quickly convey corporate events and other information to overseas investors.”

In fact, Yuhan Corporation carried out a treasury stock buyback worth approximately 420 billion won at the end of last month, and public filings indicate that BlackRock made a number of purchases of Yuhan Corporation shares during this period.

Yuhan Corporation is not the only company in which BlackRock has recently increased its stake. The impact on the market of BlackRock’s acquisition of shares in Alteogen, a leading domestic biotech platform company, was far greater. On the 7th, BlackRock disclosed that it holds a 5.03% stake in Alteogen. As recently as the 30th of last month, it held a 4.98% stake—which was below the disclosure threshold—but once it exceeded 5%, it was required to disclose its ownership. Alteogen is attracting attention in the global market for its innovative pharmaceutical platform technologies, including its core technology (ALT-B4) that converts intravenous (IV) injections to subcutaneous (SC) injections. In addition, BlackRock expanded its stake in HLB to over 5% in March and further increased it to 7.15% in August.

Failed Investments in Helixmith and SillaJen… Will This Time Be Different?

Of course, BlackRock has not always been successful in its

investments

in domestic biotech companies. It does have a history of failed investments in Korean biotech firms. Helixmith, which failed in the Phase 3 clinical trial of its gene therapy “Engensis” (VM202), is a prime example.

BlackRock emerged as a major shareholder in March 2020 when it disclosed that it held a 5.08% stake in Helixmith. At the time, expectations for the clinical success of Engensis—which Helixmith was developing—were rising, and BlackRock took advantage of this period to purchase shares. However, when Helixmith’s Phase 3 clinical trial ultimately failed, the stock price began to plummet, and it is reported that BlackRock sold off most of its stake by the end of that year, incurring a loss of approximately 70%.

SillaJen is also well-known as a company in which BlackRock invested. BlackRock made its presence known as an investor in 2019 by disclosing that it held a 5.01% stake in SillaJen. What is particularly noteworthy is that this came shortly after SillaJen faced a major setback when the U.S. Data Monitoring Committee (DMC) recommended halting its global Phase 3 clinical trial for Pexa-Vec, a liver cancer treatment. Consequently, SillaJen faced a series of setbacks that pushed it to the brink of delisting, and it is estimated that BlackRock also incurred losses by liquidating a large portion of its stake during this process.

Based on this, industry experts advise that BlackRock’s recent expansion of investment in K-Bio should be viewed in this context. An industry insider stated, “Since overseas institutional investors prioritize corporate fundamentals, it can be seen that this investment was made in line with that approach,” adding, “However, it is accurate to say that the stock prices of the domestic biotech companies BlackRock invested in this time were depressed due to a market correction, and it is difficult to conclude that their existing investment criteria have changed significantly.”