Morgan Stanley 'dubiously' underestimates Celltrion
Morgan Stanley 'dubiously' underestimates Celltrion
By Park Jae-hyuk
Morgan Stanley has been suspected of accentuating a negative outlook for Celltrion on purpose.
Small investors in Korea have suspected that the U.S.-based global investment bank is trying to pull down the Korean pharmaceutical company's stock price.
This is because Morgan Stanley has conducted a huge amount of short selling that bets on a drop in Celltrion's stock price.
Short selling is an investment method in stock trading where investors sell stocks they don't own. The short sellers borrow the stocks to return them later to the lender by repurchasing the same stocks.
They use this method in a bear market, as they can make profits by repurchasing shares at prices lower than the prices at which they sold the stocks.
According to industry officials, Thursday, Morgan Stanley has fixed the target price of Celltrion at 80,000 won ($71) since May last year, while the Korean company's shares have closed at around 170,000 won over the past few weeks.
Researcher Jennifer Kim suggested a reduction of investments in Celltrion, setting the company's target price at 80,000 won, in a report released on Oct. 18.
The report said Celltrion Chairman Seo Jung-jin's target market shares for Remsima in the United States and Truxima in Europe seem unrealistic. The researcher maintained her outlook in two reports issued last week, according to industry officials.
Since then, Celltrion's shares temporarily dropped, but soon rebounded.
Unlike Morgan Stanley, Korean securities firms have raised the target prices of Celltrion, since its biosimilars began expanding their presences in the global market.
The target price suggested by 16 local securities firms for the past three months was 179,063 won on average as of last week, according to a financial information company, Wise FN.
The biopharmaceutical company also posted 442.7 billion won in sales and 227.7 billion won in operating profits in the first half of this year, up from 293.5 billion won and 104.1 billion won a year ago, respectively.
However, Morgan Stanley's report highlighted Celltrion's dependency on a copycat drugs portfolio, saying it has lower pricing power and is increasingly facing intense competition from larger and well-capitalized hybrid biosimilar competitors, such as Pfizer, Amgen, Novartis and Merck.
Morgan Stanley is a holder of a large short-selling balance that is more than 0.5 percent of its listed shares and the leading short seller on the Seoul bourse.
The trade volume of short selling of Celltrion shares hit a record high of 75.2 billion won on Oct. 17, a day before the release of Morgan Stanley's first report. Back then, Celltrion was designated as an overheated short selling stock, but the short selling trade volume was 64.7 billion won Oct. 25.
"Our research department is independent of all other parts of the firm as per global practices and regulations," a Morgan Stanley spokesman said. "Our short positions in Celltrion disclosed on the Korea Exchange's website largely reflect hedge trading activity in connection with client trades."
