2022–2023 Rate Relief Triggered Pharma and Biotech Rebounds
Large-Cap Biotech Rallies Amid Semiconductor Slump as Institutional Buying Flows In
As the semiconductor-driven rally in the South Korean stock market faces severe headwinds, the pharmaceutical and biotech sector is increasingly positioned to take the baton as market leadership. While recent corrections have rippled across semiconductor shares and their supply chain vendors, major biotech large-caps have demonstrated relative resilience.
Historically, biotech stocks have rebounded against broader market downturns during periods of easing interest rate pressures. Notable precedents include the pullback in long-term yields in 2022 and growing expectations for Federal Reserve rate cuts in late 2023. Today, a combination of the semiconductor correction and tangible business achievements by domestic biotech firms is drawing renewed attention to these historical rate-inflection rebounds.
Biotech Rebounds in 2022 Bear Market, Gains Momentum on 2023 Rate-Cut Expectations
In 2022, the U.S. Federal Reserve aggressively raised benchmark interest rates to curb inflation. After starting the year at 0%–0.25%, the base rate surged to 4.25%–4.50% by year-end, severely hammering growth stocks across the domestic market.
However, once long-term Treasury yields peaked in mid-June that year, biotech stocks staged a recovery. Between June 16 and July 6, while the KOSPI tumbled over 6%, Celltrion surged 22.7%, with Celltrion Healthcare and Hanmi Pharmaceutical also posting double-digit gains.
By July, the upward momentum broadened to names such as HLB, SK biopharm, and SK bioscience. As growth-stock sentiment—previously choked by soaring interest rates—partially recovered, corporate growth catalysts such as new drug development and vaccine pipelines were reflected in share prices.
In October of the same year, major pharma and biotech players including Yuhan, Hanmi Pharmaceutical, and Samsung Biologics outperformed the KOSPI index. Distinct from a broad market rebound, companies with solid earnings and growth potential exhibited notable relative strength.
The upward trajectory of the biotech sector became even more pronounced in late 2023. Following the Fed's signal in December that its tightening cycle may have concluded, the KRX300 Healthcare Index jumped 13.34% between December 1 and 27. The KRX Healthcare Index advanced 11.62% over the same period.
Landmark technology transfers by domestic firms provided strong fundamental backing. Yuhan secured a licensing deal worth approximately $1.3 billion with Novartis in November, while L&C Bio (formerly LegoChem Biosciences) sealed an approximately $1.7 billion antibody-drug conjugate (ADC) licensing agreement with a Johnson & Johnson affiliate in December.
Biotech companies require extensive time horizons, spanning from R&D to the commercialization of novel drugs. Falling market interest rates elevate the present value of future earnings and alleviate capital-raising burdens. Past market cycles demonstrate that easing rate pressures can serve as a catalyst to reassess the growth value of biotech enterprises.
Biotech Ascends as Semiconductor Hegemony Falters; Shifts Emerge in Share Prices and Institutional Flows
Observers suggest that the biotech rallies witnessed during past rate inflections could repeat today as the semiconductor-led market momentum wavers.
Indeed, between the 12th and 16th, domestic equities showed a stark divergence in price action between semiconductor and biotech large-caps. While the KOSPI plummeted over 14%—with Samsung Electronics and SK Hynix posting double-digit declines—Yuhan, Celltrion, and Samsung Biologics finished higher. Amid widespread corrections across not only semiconductor heavyweights but also related materials, parts, and equipment suppliers, large-cap biotech stocks maintained relative strength.
Institutional accumulation was also evident. Over the same period, institutional investors net-bought approximately 170.9 billion KRW of Samsung Biologics and 147.8 billion KRW of Celltrion. Both companies ranked among the top 10 choices for institutional net buying. Accompanied by share price gains, steady weekly inflows underscored the outperformance of earnings-backed biotech heavyweights.
U.S. markets also saw a decoupling between semiconductors and healthcare last week. While the Philadelphia Semiconductor Index dropped 11.4%, the Health Care Select Sector SPDR Fund (XLV) gained 3.45%. As anxieties over artificial intelligence (AI) capital expenditures and profitability weighed on chipmakers, the healthcare sector exhibited relative defensive strength.
Furthermore, the business achievements of domestic biotech firms have become far more concrete than in the past. Samsung Biologics is driving earnings growth through expanded contract development and manufacturing organization (CDMO) orders, while Celltrion is capitalizing on rising sales of its novel biosimilars. Alteogen, the top-ranked stock on the KOSDAQ by market capitalization, has begun securing commercialization revenues driven by the global expansion of Keytruda SC, which utilizes its proprietary platform technology. Yuhan has initiated overseas commercialization for its targeted anti-cancer drug Leclaza, and HLB secured U.S. Food and Drug Administration (FDA) approval for its cholangiocarcinoma treatment in September. L&C Bio is also expanding its global footprint through ADC licensing agreements.
While past biotech rebounds were largely driven by the revaluation of growth assets amid easing rate pressures, the current environment is bolstered by expectations that new drug approvals and licensing achievements will translate directly into earnings growth, all while the market's heavy concentration in semiconductors eases. The ongoing release of third-quarter earnings reports by major biotech firms further focuses attention on the sector.
In 2022 and 2023, biotech rallies were fueled by a combination of monetary easing and company-specific growth expectations. Today, as the semiconductor-led equity rally loses steam—accompanied by institutional capital flowing into biotech large-caps and bolstered by tangible drug approvals and commercialization milestones—the pharmaceutical and biotech sector is increasingly poised to emerge as the market's next dominant leadership group.
