With SK Bioscience's (302440.KS) vaccine business still struggling, PCV21, a next-generation candidate aimed at the pneumococcal conjugate vaccine market, is emerging as the company's medium- to long-term growth driver.
SK Bioscience's parent-only revenue fell 20% in the second quarter from a year earlier, according to Heungkuk Securities. Revenue at IDT Biologika, the German contract development and manufacturing organization consolidated as a subsidiary, rose 0.2% over the same period, holding steady. IDT also swung to an operating profit. With the vaccine business weak, IDT's contract manufacturing operations are cushioning the downside in earnings.
Revenue declined in the second quarter as some vaccine sales were deferred. The operating loss narrowed somewhat, however, on lower selling and administrative expenses, including research and development costs. IDT is also streamlining its cost structure through workforce optimization and improvements to production processes. Analysts expect profitability to improve as the company raises the share of higher-value contracts and wins more orders in North America.
Over the longer term, clinical progress on PCV21 is the key. The candidate is in global Phase 3 trials, with major results expected in 2027. SK Bioscience is targeting commercialization in 2029.
The pneumococcal vaccine market is a large one contested by global pharmaceutical and biotech companies. Analysts estimate the global PCV market at about 17 trillion won ($12 billion). Success in trials and commercialization would give SK Bioscience a foothold in that market, beyond its existing vaccine operations.
The company has also secured funding for PCV21's development and commercialization. It became the first domestic developer of new drugs and vaccines selected for support from the National Growth Fund, obtaining 300 billion won in long-term liquidity at ultra-low interest rates. The money will go toward PCV21 research and development, commercialization preparations and upgrades to manufacturing capacity.
Analysts see the Phase 3 results as a turning point for any rerating of the company's value. PCV21 sales in 2030 and 2031 are estimated at 120 billion to 220 billion won. The question is whether the new growth driver can translate into actual revenue, beyond the current weakness in the vaccine business.
Heungkuk Securities maintained a buy rating on SK Bioscience with a target price of 52,000 won, citing IDT's steady revenue growth, the scope for better profitability over the medium to long term, and the growth potential tied to PCV21's Phase 3 results despite the weakness in the core vaccine business.
