A growing number of listed South Korean companies are making inroads into the biotechnology industry in a search for new revenue streams despite having no experience in the sector, and some of their intentions are now being questioned.

Some observers regard the diversification by firms specializing in auto parts, IT, semiconductor and game development as a positive sign as they look for future growth engines, but others are more skeptical over their motivations. There are indications that the ultimate goal of some may be to raise struggling stock prices.

South Korea’s biotech firms have been enjoying robust growth in their stock prices, as investment and funding have poured into the industry due to the Covid-19 pandemic. Newcomers have also benefited, with some of the 10 companies that announced plans to start a biotech business last year seeing their stock prices rise significantly.

The share price of automotive bulbs manufacture Kumho HT rose almost eight times to a 52-week high of 4,985 won from a low of 577 won after it invested 20 billion won ($18.2 million) in DiNonA, a company developing personalized antibody drugs.

Central Insight, a manufacturer of ATMs, saw its stock price rise more than 10 times to 52-week high of 14,050 won from a low of 1,196 won when it invested 20 billion won into AzothBio, which specializes in new drug development AI platforms.

However, not all companies have done well. Innowise, a manufacturer of molds for automobile parts, was put on a workout program last July after it decided to enter the biotech industry to find a new growth engine and became engulfed in a dispute over management rights.

Innowise is set to be acquired by a consortium led by Winforsy, a metal 3D printing-based manufacturing company. It is not yet clear whether the company will continue to do business in the biotech industry after its sell-off, which might mean that people who invested after the announcement of its new business would lose money.

“As the future of the biotech industry looks promising, a growing number of listed companies are preparing to enter the business. However, there are many whose purpose is only to boost their stock prices,” an industry source said.

“If such a tactic increases the valuation of other biotech companies, it may cause overvaluation fears.” (Reporting by Aran Shim)

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