Brokerages slash target prices for shares in Hanmi

Shares of Hanmi Pharmaceutical nosedived Tuesday to a low for the year after the company came under investigation for alleged insider trading and brokerages slashed target prices for the stock.

The country’s top drug maker is suspected of delaying the announcement of the ending of a partnership with Germany’s Boehringer Ingelheim to allow certain investors to sell Hanmi shares.

Although Hanmi denies the charge, analysts worry that the case will dent confidence in Hanmi and other bio pharmaceutical players trying to develop next generation medicines.

On Sept. 30, Hanmi announced that German drug maker Boehringer Ingelheim had returned development and commercialization rights for its lung cancer treatment, Olmutinib, due to poor marketability and unfavorable outcomes of clinical trials, which involved two deaths from the medicine’s side effects.

Hanmi Pharmaceutical plunged 7.3 percent on Tuesday to 471,000 won ($425). Shares in its holding company Hanmi Science lost 8.3 percent to fall to 104,500 won. Over 2 trillion won was wiped out from Hanmi Pharmaceutical’s capitalization during trading on Sept. 30 and Tuesday.

Hanmi Pharmaceutical shares experienced a record high of short selling on Sept. 30, the day the drug maker announced the contract’s termination. The fact that almost half of the short sales - or some 32 billion won out of 61.6 billion won - were made before the announcement, according to Korea Exchange, bolsters suspicion that some institutional investors may have received the information in advance.

On Sept. 29, Hanmi announced a $910 million licensing contract with American drugmaker Genentech.

Securities companies lowered their target prices for Hanmi Pharmaceutical in the wake of the controversy.

“Hanmi’s announcements giving both favorable and negative news in 17 hours brought confusion to the markets and affected investors’ sentiment,” said Lee Hye-rin, an analyst at KTB Investment & Securities.

The brokerage house cut Hanmi’s target price to 800,000 won from 880,000 won. Other securities companies made more drastic cuts. Hyundai Securities slashed its target from 1,220,000 won to 710,000 won while Eugene Investment & Securities cut its to 740,000 won from 1,090,000 won.

Hanmi Pharmaceutical was considered a pioneer for Korea, showing the way to a prosperous and innovative future to an industry used to making copycat drugs. The company’s standing in industrial circles was so lofty that its fall is reverberating with other drug makers.

JW Pharmaceutical shares declined 15.2 percent Tuesday and Chong Kun Dang Healthcare closed down 0.5 percent. Yungjin Pharmaceutical and Bukwang Pharmaceutical both plummeted over 1 percent.

“Hanmi’s loss of the contract has led investors to take a more conservative view in gauging the possibility of success in new drug development,” said Seo Geun-hee, an analyst at Daishin Securities.

“The cancellation of the contract reminds investors of the inherent riskiness in the development of novel drugs,” said Bae Ki-dal, a researcher from Shinhan Investment’s research center.

“The chance that a new drug will be fully authorized stands at 9.6 percent, according to a U.S. association representing the bio industry,” the researcher said.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]