Samsung Biologics shares rally on expectations on deal with Moderna

[Photo by Samsung Biologics Co.]

Shares of Samsung Biologics Co. are on a strong note in Tuesday morning on rising expectations on the imminent deal with Moderna to produce its Covid-19 vaccines in South Korea.

As of 11:41 a.m. on Tuesday, Samsung Biologics shares jumped 2.17 percent to 893,000 won ($788) in Seoul. The company snapped its winning streak for eight consecutive trading days on Monday to close down 7.81 percent at 874,000 won.

Despite the correction on Monday, Samsung Biologics has gained around 9 percent since the beginning of the month, whereas the main Kospi market has slipped 0.4 percent over the period.

The focus is now on whether it will be able to become the first bio stock in Korea to see the price exceed 1 million won per share.

Yuanta Securities has set the highest target price for Samsung Biologics at 1.08 million won, and other brokerages including NH Investment & Securities, Samsung Securities and Shinhan Financial Investment predict it would go up to near 1 million won.

But those target prices have been set by excluding the possibility of contract manufacturing deal with Moderna. If the deal is confirmed, the value of the company would increase even higher.

Expectations are running high as Samsung Biologics CEO John Rim is expected to fly to the U.S. on Wednesday ahead of President Moon Jae-in¡¯s first summit with President Joe Biden in the U.S. scheduled on Friday (local time).

Market watchers believe that Samsung Biologics and Moderna are highly likely to announce the deal during the summit in which the two heads of state will mainly discuss on bilateral cooperation on Covid-19 vaccine procurement and production along with other issues including North Korean issues.

Huh Hye-min, an analyst from Kiwoom Securities, estimates that if Moderna is to consign production of 40 million doses to Samsung Biologics, it would lead to 45 billion won to 90 billion won in sales given the vaccine¡¯s market price at $15, operating profit margin at 65 percent and unit production cost at $1 to $2.

If Samsung Biologics doesn¡¯t disclose details in the contract, it would be much difficult to estimate its future benefit, but the upward momentum in its stock price would be maintained at least until the deal is reflected into its earnings in the latter half of the year, Huh said.

The company has been buoyed since last week by the news that it is reportedly imminent to sign a contract with U.S. drug maker Moderna to manufacture its Covid-19 vaccines in Korea, with its share price surging 24 percent from May 6 to May 14 to finish at 948,000 won. Its market capitalization also ballooned to 9.5 trillion won, allowing it to briefly ascend to No.3 by beating LG Chem.

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