SK Biopharmaceuticals, the new drug development unit of South Korea’s telecom-to-energy conglomerate SK Group, is gearing up to go public on the main bourse Kospi.

According to industry sources, the company recently sought proposals from seven major Korean securities firms to pick a deal manager.

“We did send out the requests, but details of the IPO have not been decided yet,” an SK Biopharma spokesperson told The Investor.

Industry sources project SK Biopharma’s valuation at between 5 trillion won ($4.40 billion) to 6 trillion won, which would make it one of the top four pharma firms listed on the Kospi, after Celltrion, Samsung BioLogics and Hanmi Pharmaceutical.

SK Biopharma, which was established in April 2011, is a spun-off entity of SK Group and is fully owned by it.

The unit has long been considered as SK Group’s new growth engine, as it is channeling funds without seeing any profits. Last year, the group injected around 125.63 billion won into SK Biopharma’s research and development department.

Moreover, Chey Yun-jeong, the eldest daughter of SK Group Chairman Chey Tae-won, in June 2017 started working at SK Biopharma as an assistant manager. Some industry insiders say the heiress working at SK Biopharma, instead of conventional SK flagships such as SK Innovation or SK Telecom, reflects the group’s push for bio and pharma sectors specializing in drugs for the central nervous system.


Why go public now?

Since the beginning of 2018, the company has been considering going public. Many industry watchers think that as it is close to seeing positive results from two of its new drug candidates -- solriamfetol and cenobamate -- now is the perfect time to start the IPO process.

The Korean firm’s biggest and most recent achievement is receiving marketing approval from the US Food and Drug Administration for its narcolepsy drug Sunosi, based on solriamfetol, in March. SK Biopharma and its partner Jazz Pharmaceuticals aim to launch the product in the US market during the first half of this year.

Industry insiders have high expectations for the IPO plans.

“SK Biopharma will receive royalty fees from Jazz Pharma, but what is more meaningful is that this achievement shows that it is constantly expanding its presence with new drug pipelines,” KB Securities analyst Lee Tae-young said. In November last year, Jazz Pharma also applied for approval from the European Medicines Agency for Sunosi.

Furthermore, the Korean company also aims to get FDA approval for commercializing its new epilepsy treatment candidate cenobamate to expand its presence in the US further.


Kospi vs. Nasdaq

Back in 2018, the company had considered getting listed on the Nasdaq to attract foreign investors, since its business is mostly based in the US. According to a local report in January last year, SK Biopharma sent out a request for proposals to foreign securities firms to pick its IPO manager.

Although, the company declined to confirm it, industry sources are of the opinion that it withdrew its plans because it saw its valuation to be higher here. Sources also noted that since it usually costs around two to three times more to get listed on the Nasdaq, SK might have found the Kospi to be more attractive.

Moreover, the Korean bio sector has also received some positive outlooks for 2019. Kium Securities’ analyst Yoo Dong-won picked it as one of the top three sectors that will grow drastically, along with information technology and alternative energy. He added that despite the economic slowdown, the bio industry will be less effected.

“This year the bio industry also has high expectations for development of new drugs,” Yoo said.

By Song Seung-hyun (ssh@heraldcorp.com)