[Korea] October 7, 2020

TIGER KRX Bio K -New Deal ETF (364970 KS) Unrivaled growth potential COMPANY ANALYSIS

Mirae Asset Daewoo Co., Ltd. Taehee Kim [email protected] Choong-hyun Kim, CFA [email protected]

Heightened profile of Korean Biotech companies are among the biggest stocks on the KOSPI biotech firms ó Biologics and are, respectively, the fifth and seventh largest stocks on the KOSPI by market cap. ó Just a decade ago, the pharmaceutical/biotech sector accounted for a mere 1% of the KOSPI and 8.2% of the KOSDAQ by market cap. Today, the sector has a 9.1% weight in the KOSPI and a 27.5% weight in the KOSDAQ. ó The biotech sector includes large, profitable companies as well as smaller, technology-focused firms.

Drivers of sustainable growth Korean biotech firms starting to carve out a place in the global market ó Korean biotech firms have landed a series of out-licensing deals with multinational pharmaceutical companies, proving their enhanced R&D capabilities. ó In 2020, Korean companies have engaged in not only drug development and technology transfer but also the launch and direct marketing of new drugs in overseas markets. ó Celltrion and Samsung Bioepis have increased their market shares in the global market. ó is solidifying its leading position in the global biologics CMO market, recently announcing a plan to build a fourth production plant.

Positive outlook for 4Q20 and Strong earnings growth, R&D momentum, and positive pandemic effects 2021 ó We project the combined revenue of Celltrion, Samsung Biologics, , and to expand at a CAGR of 18.8% over the next three years. ó We look for R&D momentum to pick up in 4Q20 and 2021, when many Korean biotech firms plan to publish and present the results of ongoing clinical trials. ó The COVID-19 pandemic could present promising opportunities for Korean companies; in the absence of a vaccine or effective treatment, they can compete on an equal footing with multinational pharmas. ó In particular, Korean CMO and diagnostic kit companies have enjoyed strong demand in the wake of the pandemic.

TIGER KRX Bio K-New Deal ETF constituents

(%) 30 26.3 24.4 25 23.5

20

15

10 8.7

4.8 5 3.8 3.4 2.0 1.8 1.2 0 SK Samsung Celltrion Celltrion Seegene Alteogen Yuhan Hanmi Celltrion Hanmi Biopharm Biologics Healthcare Pharm Pharm Science

Source: Mirae Asset Daewoo Research

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. October 7, 2020 TIGER KRX Bio K-New Deal ETF

C O N T E N T S

I. Executive summary 3

II. Unrivaled growth potential 4 1. The pharma/biotech sector’s weight in the KOSPI has increased to 9.1% 4 2. Drivers of sustainable growth 5

III. 4Q20 and 2021 outlook 8 1. Both revenue and operating profit to grow sharply 8 2. A variety of R&D achievements likely 9 3. Benefiting from COVID-19 11

IV. Status check and outlook by segment 14 1. Biosimilars 14 2. In-vitro diagnostics 18

V. ETF overview 21 Diversified exposure to new drugs, biosimilars, and diagnostic kits 21

Mirae Asset Daewoo Research 2 October 7, 2020 TIGER KRX Bio K-New Deal ETF

I. Executive summary

Biotech companies are among the biggest stocks on the KOSPI

Samsung Biologics and Celltrion are, respectively, the fifth and seventh largest stocks on the KOSPI by market cap. The four largest stocks on the KOSDAQ are Celltrion Healthcare, Seegene, HLB, and Alteogen. The pharmaceutical/biotech sector, which just a decade ago accounted for a mere 1% of the KOSPI, has become one of Korea’s flagship industries. In our view, the industry’s rapid growth is not a bubble but will be sustained over the long term.

Drivers of sustainable growth

1) Growing R&D capabilities

Korean biotech firms have landed a series of out-licensing deals with multinational pharmaceutical companies, proving their enhanced R&D capabilities. The number of such deals has increased sharply in recent years; in 2015 alone (the year the re-rating of biotech stocks began), Hanmi Pharmaceutical clinched major deals with four global firms (Boehringer Ingelheim, Eli Lilly, Sanofi, and Janssen). Over an eight-month period beginning in Nov. 2018, Yuhan signed major out-licensing deals with Janssen, Gilead Sciences, and Boehringer Ingelheim.

2) Moving beyond technology transfer to direct drug releases

Korean biotech companies are currently gearing up to bring their new drugs to market. Notably, SK Biopharmaceuticals will directly market two of its in-house developed drugs in the US: Sunosi (narcolepsy treatment; released in Jul. 2019) and Xcopri (antiepileptic drug; May 2020). We believe Xcopri has strong commercial potential, as it demonstrated superior efficacy to existing treatments in a study (findings were published in a renowned journal). Hanmi Pharmaceutical is also set to release new drugs in the US, albeit through a marketing partner. The firm’s Rolontis (neutropenia treatment) and Oraxol (an oral anti-cancer drug) are expected to receive FDA approval at end-Oct. 2020 and in Feb. 2021, respectively.

3) Korean biotech firms leading the global biosimilars market

Korean firms are increasing their dominance in the global biosimilars market. Globally, Celltrion/Celltrion Healthcare and Samsung Bioepis have the largest market shares in a number of segments. In Europe, Celltrion’s Remsima and Truxima command market shares of 57% and 40%, respectively, outgrowing their reference drugs. Samsung Bioepis’s Benepali and Imraldi are seeing rapid market share gains.

4) Samsung Biologics, the largest player in the global biologics CMO market

Samsung Biologics, which started out with a 30,000-liter plant, became the world’s third largest CMO player when it established a second plant (152,000 liters), and moved to the no. 1 spot by building a third plant (180,000 liters). Recently, the company announced that it would build a fourth plant (256,000 liters), widening its lead over the second and third largest players.

Positive outlook for 4Q20 and 2021 We have a positive outlook for 2H20 and 2021. We project the combined revenue and operating profit of four major pharmaceutical/biotech firms—Celltrion, Samsung Biologics, Hanmi Pharmaceutical, and Yuhan—to expand at CAGRs of 18.8% and 53.8%, respectively, over the next three years. Notably, significant licensing deals, a pivotal factor in elevating enterprise value, are expected to materialize, and many Korean firms are planning to present the results of ongoing clinical trials and participate in global conferences in 4Q20 and 2021. In addition, the COVID-19 pandemic is presenting opportunities to Korean biotech players, which are moving as quickly as global rivals to develop vaccines and treatments (with good prospects for commercial results). CMO companies are receiving large-scale supply contracts from capacity-strapped multinational pharmas. In particular, Korean diagnostic kit companies have been able to promote their technologies globally and record explosive earnings growth amid the pandemic.

Mirae Asset Daewoo Research 3 October 7, 2020 TIGER KRX Bio K-New Deal ETF

II. Unrivaled growth potential

1. The pharma/biotech sector’s weight in the KOSPI has increased to 9.1%

Just a decade ago, the pharmaceutical/biotech sector accounted for a mere 1% of the KOSPI and 8.2% of the KOSDAQ by market cap. Today, the sector has a 9.1% weight in the KOSPI and a 27.5% weight in the KOSDAQ.

Samsung Biologics and Celltrion are, respectively, the fifth and seventh largest stocks on the KOSPI by market cap. And notably, after the three-way merger of Celltrion, Celltrion Healthcare, and Celltrion Pharm (under a plan recently announced by Celltrion Group; combined market cap of W52tr), the merged entity stands to be the third largest stock on the KOSPI after and SK Hynix.

Newly listed biotech stocks have contributed to the market weight expansion of the pharmaceutical/biotech sector in the KOSPI, but strong share rallies by existing companies have been the core driver. The KRX Healthcare Index has soared a whopping 211% since 2015, outperforming the KOSPI by 188%p. The sector has also outperformed this year due to the pandemic.

Figure 1. Pharma/biotech sector’s weight in the KOSPI Figure 2. Pharma/biotech sector’s weight in the KOSDAQ

(%) (%) 10 35 9.1% 9 30 27.5% 8 7 25 6 20 5 15 4

3 10 2 5 1 0 0 00 02 04 06 08 10 12 14 16 18 20 00 02 04 06 08 10 12 14 16 18 20

Source: Quantiwise, Mirae Asset Daewoo Research Source: Quantiwise, Mirae Asset Daewoo Research

Figure 3. Relative performances of the KOSPI and KRX Figure 4. Relative performances of the KOSPI and KRX

Healthcare Index since 2015 Healthcare Index since 2020

(P) (P) 400 KOSPI KRX Healthcare Index 200 KOSPI KRX Healthcare Index

350 180 160 300 140 250 120

200 100 80 150 60 100 40 50 20

0 0 1/15 1/16 1/17 1/18 1/19 1/20 1/20 2/20 3/20 4/20 5/20 6/20 7/20 8/20 9/20 10/20

Source: Quantiwise, Mirae Asset Daewoo Research Source: Quantiwise, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 4 October 7, 2020 TIGER KRX Bio K-New Deal ETF

Aside from improved fundamentals, the Korean pharmaceutical/biotech sector’s outperformance can be attributed to investors’ high expectations for new drug pipelines. Going forward, we expect companies’ enhanced technology and tangible R&D achievements (e.g., licensing deals and new drug commercialization) to drive sector-wide growth and share rallies.

2. Drivers of sustainable growth

1) Growing R&D capabilities

Korean pharmaceutical/biotech companies have been leveling up their R&D capabilities, which should serve as a fundamental driver of share price re-ratings going forward. Korean biotech firms have landed a series of out-licensing deals with multinational pharmaceutical companies, proving their enhanced R&D capabilities .

We believe the sheer size of these out-licensing deals and milestone arrangements is a vote of confidence from multinational companies in the efficacy and strong commercial potential of Korean companies’ pipeline drugs.

The number of such deals has increased sharply in recent years; in 2015 alone (the year the re-rating of biotech stocks began), Hanmi Pharmaceutical clinched major deals with four global firms (Boehringer Ingelheim, Eli Lilly, Sanofi, and Janssen). Notably, Hanmi Pharmaceutical licensed three pipeline assets to Sanofi for W5tr.

Over an eight-month period beginning in Nov. 2018, Yuhan signed major out-licensing deals with Janssen, Gilead Sciences, and Boehringer Ingelheim. In 2019, Bridge Biotherapeutics, then a privately held company, licensed its BB-877 for idiopathic pulmonary fibrosis to Boehringer Ingelheim for W1.5tr, which was the largest deal in Korean history by far for a single pipeline asset.

Table 1. Korean biotech firms’ out-licensing deals with multinational pharmas Developer Date Partner Indication Phase Milestones Up-front (%) LG Life Sciences 11/7/07 Gilead Sciences Liver disease Phase 2a US$200mn US$20mn (10.0%) Medifron 1/19/10 Roche Dementia Pre-clinical US$290mn Medytox 9/26/13 Allergan Botox Phase 2 (Australia) US$362mn US$65mn (18.0%) Development/distrib SK Chemicals 3/19/14 Sanofi PPSV W50bn W25bn (50.0%) ution Rheumatoid Hanmi 3/19/15 Eli Lilly Phase 1 US$690mn US$50mn (7.2%) arthritis Hanmi 7/28/15 Boehringer Ingelheim Lung cancer Phase 2 (Korea) US$730mn US$50mn (6.8%) Pre-clinical/phase Hanmi 11/5/15 Sanofi Diabetes EUR3.9bn EUR400mn (10.3%) 1/2 Hanmi 11/9/15 Janssen Diabetes Phase 1 US$915mn US$105mn (11.5%) Hanmi 9/29/16 Genentech Cancer Phase 1 (Korea) US$910mn US$80mn (8.8%) Cancer Dong-A ST 12/28/16 AbbVie Discovery US$525mn US$40mn (7.6%) immunotherapy Yuhan 11/3/18 Janssen Lung cancer Phase 2 US$1.26bn US$50mn (4.0%) Yuhan 1/6/19 Gilead Sciences NASH Discovery US$785mn US$15mn (1.9%) Cancer (3 LegoChem 3/22/19 Millennium (Takeda) Pre-clinical W454.8bn W8.16bn (1.8%) targets) Yuhan 7/1/19 Boehringer Ingelheim NASH Pre-clinical US$870mn US$40mn (4.6%) Bridge 7/17/19 Boehringer Ingelheim IPF Phase 1 (Korea) EUR1.1bn EUR45mn (4.1%) Biotherapeutics Proprietary Alteogen 11/29/19 Global top 10 pharma SC technology W1,600bn W15.3bn (0.9%) technology Proprietary Alteogen 6/24/20 Global top 10 pharma SC technology W4,677bn W19.4bn (0.4%) technology Hanmi 8/4/20 Merck NASH Phase 2 (obesity) US$870mn US$10mn (1.1%) Source: Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 5 October 7, 2020 TIGER KRX Bio K-New Deal ETF

2) Moving beyond technology transfer to direct drug releases

Korean biotech companies are currently gearing up to bring their new drugs to market. Notably, they are engaged not only in drug development and forging licensing deals but also in launching and directly marketing new drugs in overseas markets. We believe this progression is meaningful, as it should lead to increased revenue.

SK Biopharmaceuticals, which completed its much-anticipated IPO in Jul. 2020, deserves particular attention, as it is the first Korean biotech company to directly market its in-house developed drugs in the US. The firm released Sunosi (narcolepsy treatment) and Xcopri (antiepileptic drug) in the US market in Jul. 2019 and May 2020, respectively.

We believe Xcopri has strong commercial potential, as it demonstrated superior efficacy to existing treatments in a study (findings that were published in a renowned journal).

Hanmi Pharmaceutical is also set to release new drugs in the US, albeit through a marketing partner. The firm’s Rolontis (neutropenia treatment) and Oraxol (an oral anti-cancer drug) are expected to receive FDA approval at end-Oct. 2020 and in Feb. 2021, respectively.

Table 2. Xcopri’s efficacy Cenobamate Cenobamate Cenobamate Placebo 100mg 200mg 400mg No. of patients 108 108 110 111 Greater median percent 36% 55% 55% 24% reductions in focal seizures (0.0071) (<0.0001) (<0.0001) 40% 56% 64% (p-value) 25% (0.0365) (<0.0001) (<0.0001) 50% or greater reduction in 4% 11% 21% 1% focal seizures (not significant) (0.002) (<0.001) (p-value) 5% 10% 14% 20% Source: The Lancet Neurology , Mirae Asset Daewoo Research 3) Korean biotech firms leading the global biosimilars market

Korean firms are increasing their dominance in the global biosimilars market. Globally, Celltrion/Celltrion Healthcare and Samsung Bioepis (a subsidiary of Samsung Biologics) have the largest market shares in a number of biosimilar segments.

In Europe, Celltrion’s Remsima and Truxima command market shares of 57% and 40%, respectively, outgrowing their reference drugs. Samsung Bioepis’s Benepali and Imraldi are seeing rapid market share gains.

We believe Korean biotech companies have secured a dominant presence in the global biosimilars market thanks to their first-mover advantage and price competitiveness. For biosimilars (which are equivalent to original drugs and other rival drugs in terms of safety and efficacy), key differentiating factors are 1) an early market lead and 2) competitive pricing. The biosimilars released by Celltrion and Samsung Bioepis are well positioned to tighten their grip on the market, being among the first to hit the market and having competitive prices.

Figure 5. European M/S by major biosimilar

(%) 70 Remsima Truxima Herzuma 57% 60

50

40 40%

30

20 19%

10

0 1st 3rd 5th 7th 9th 11th 13th 15th 17th 19th 21st

Source: IQVIA, Celltrion, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 6 October 7, 2020 TIGER KRX Bio K-New Deal ETF

4) Samsung Biologics, the largest player in the global biologics CMO market

Samsung’s strategy of occupying the biologics CMO space as a beachhead to enter the biotech industry has proven a success. Samsung Biologics, which started out with a 30,000- liter plant, became the world’s third largest CMO player when it established a second plant (152,000 liters), and moved to the no. 1 spot by building a third plant (180,000 liters). Recently, the company announced that it would build a fourth plant (256,000 liters), widening its lead over the second and third largest players.

We expect the biologics CMO market to display a high CAGR of 15% through 2025, driven by: 1) rapidly growing sales of biologics; 2) the robust biosimilars market; and 3) pharmas’ growing dependence on production through CMOs as a risk control measure.

Figure 6. Samsung Biologics: No. 1 in the global biologics CMO Figure 7. Samsung Biologics: Biologics CMO capacity market (by capacity)

Samsung Biologics 364 256 Plant 1 Plant 2 Plant 3 Plant 4

Capacity 30kL 152kL 180kL 256kL Boehringer Ingelheim 300 150

2kL Lonza 260 170 15kL*10 Plant units 5kL*6 15kL*12 10kL 1kL*2 15kL WuXi Biologics 54 226

Cost W350bn W700bn W850bn W1,740bn Pantheon 55 Construction start 5/11 9/13 10/15 9/20 CMC 52 Present Planned Completion 1/13 2/16 10/18 2022F

(kL) - 100 200 300 400 500 600 700

Source: Samsung Biologics, Mirae Asset Daewoo Research Source: Samsung Biologics, Mirae Asset Daewoo Research

Figure 8. Biologics CMO market to expand at a CAGR of 15.1% Figure 9. Biologics market to expand at a CAGR of 9.6%

(US$bn) (US$bn) 35 Biologics CMO market 600 Biologics revenue

30 500 CAGR: 9.6% 25 CAGR: 15.1% 400 20 300 15 200 10

100 5

0 0 18 19F 20F 21F 22F 23F 24F 25F 12 14 16 18 20F 22F 24F 26F

Source: EvaluatePharma, Mirae Asset Daewoo Research Source: EvaluatePharma, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 7 October 7, 2020 TIGER KRX Bio K-New Deal ETF

III. 4Q20 and 2021 outlook

1. Both revenue and operating profit to grow sharply

We have a positive outlook for 2H20 and 2021. We project the combined revenue and operating profit of four major pharmaceutical/biotech firms—Celltrion, Samsung Biologics, Hanmi Pharmaceutical, and Yuhan—to expand at CAGRs of 18.8% and 53.8%, respectively, through 2022.

The rapid growth of Celltrion Group warrants attention. For Celltrion Healthcare, we expect revenue (which jumped 54% YoY in 1H20) to expand 85% YoY in 2H20, aided by: 1) Inflectra’s steady market share gains; and 2) Truxima’s rapidly growing US exports. OP margin is also improving sharply on the increasing revenue contribution of high-margin products. We also look for solid revenue growth (+27% YoY in 2H20) and margin improvement at Celltrion, aided by: 1) the full operation of newly added capacity at the no. 1 plant; and 2) improvements in cell line/process development.

Looking to 2021, Celltrion Group’s growth should be driven by: 1) Remsima SC (which recently gained an additional indication as a treatment for inflammatory bowel disease) in 1H; and 2) CT-P17 (high-concentration Humira biosimilar) in 2H. Beginning in February, Remsima SC has been rolled out in a number of European countries, including Germany. We expect the drug’s market penetration to gain traction, given its greater convenience and efficacy relative to Remsima IV. Meanwhile, Celltrion’s CT-P17 is anticipated to be released in 2Q21 and could be the first biosimilar to enter the high-concentration formulation market. High-concentration formulation sales have increased rapidly, representing 74% of total Humira sales in the US and 90% of sales in Europe. As such, we see high potential for CT-P17’s commercial success.

For Samsung Biologics, revenue is forecast to grow at a CAGR of 31% through 2022, given: 1) the supply contracts the company recently signed; 2) rising utilization at its no. 3 plant; and 3) increases in contract prices. Notably, the biotech industry’s current capacity shortages should lead to more favorable contract terms. We also find it encouraging that the company is expanding beyond CMO to the CDO and CRO businesses. We see operating profit growing at a CAGR of 80% through 2022, with OP margin likely to reach 34% in 2022.

Figure 10. Combined revenue of four major pharmaceutical/ Figure 11. Combined OP of four major pharmaceutical/ biotech firms biotech firms

(Wbn) (Wbn) 8,000 7,375 3,000

7,000 6,441 2,433 2,500 6,000 5,535 1,952 2,000 5,000 4,396 3,784 1,481 4,000 1,500

3,000 1,000 669 2,000 503 500 1,000

0 0 2018 2019 2020F 2021F 2022F 2018 2019 2020F 2021F 2022F

Note: Based on Celltrion, Samsung Biologics, Hanmi Pharmaceutical, and Yuhan data Note: Based on Celltrion, Samsung Biologics, Hanmi Pharmaceutical, and Yuhan data Source: Quantiwise, Mirae Asset Daewoo Research Source: Quantiwise, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 8 October 7, 2020 TIGER KRX Bio K-New Deal ETF

Figure 13. High-concentration formulation sales account for Figure 12. Remsima SC to drive growth in 2021 90% of total Humira sales in Europe

Source: Celltrion, Mirae Asset Daewoo Research Note: As of Dec. 2018 Source: IQVIA, Mirae Asset Daewoo Research

2. A variety of R&D achievements likely

For biotech firms, out-licensing deals with multinational pharmas are a key driver of enterprise value. Securing such a deal not only proves the competitiveness of the relevant drug candidate but also brings an end to various costs related to clinical trials and regulatory procedures.

We expect to see additional out-licensing deals, as domestic biotech firms have made steady advances in technologies. Many Korean firms are currently conducting global clinical trials and planning to publish and present the results in 4Q20 and 2021.

We believe MedPacto’s vactosertib and Genexine’s GX-I7 deserve attention.

MedPacto’s vactosertib is a TGF-β inhibitor. Cancer cells secrete TGF-β, which promotes tumor growth, causes metastasis, and induces tolerance to cancer immunotherapies by lowering the activation of immune cells. By inhibiting TGF-β, vactosertib contains tumor growth and metastasis and overcomes tolerance to cancer immunotherapies through the activation of immune cells. Notably, vactosertib can be developed to target a wide variety of cancers, given that most types of cancer secrete TGF-β.

MedPacto is currently conducting clinical trials for vactosertib in combination with Merck’s Keytruda (colorectal and gastric cancer) as well as AstraZeneca’s Imfinzi (NSCLC). In the metastatic colorectal/gastric cancer clinical trial with Merck’s Keytruda (PD-1 inhibitor), the vactosertib combination therapy showed a 33.3% objective response rate (ORR; complete remission + partial remission), vs. 0% for the Keytruda monotherapy. The disease control rate (DCR; complete remission + partial remission + stable disease) was 33.3%, vs. 11.0% for the Keytruda monotherapy. The clinical trial in combination with AstraZeneca’s Imfinzi (PD-L1 inhibitor) also demonstrated synergistic effects as a combination therapy.

Genexine’s GX-I7 is a long-acting interleukin-7 therapy that stimulates T-cell development. The company already conducted preclinical trials for GX-I7 in combination with a variety of immune checkpoint inhibitors, including PD-1, PD-L1, and CTLA-4 inhibitors, demonstrating synergistic effects as a combination therapy. Thanks to these results, the company is currently conducting clinical trials after signing co-development contracts with multinational pharmas, including Roche, Merck, and BMS.

The most anticipated clinical study is a phase 1b/2 co-administration trial with Keytruda for triple negative breast cancer (TNBC). Clinical data presented at the American Society of Clinical Oncology (ASCO) meeting in May 2020 showed that the combination therapy was effective for three out of six patients (with a dose of 1,200µg/kg). Meanwhile, the Keytruda monotherapy showed only a 5.3% ORR (complete remission of 1.2% + partial remission of 4.1%).

Mirae Asset Daewoo Research 9 October 7, 2020 TIGER KRX Bio K-New Deal ETF

Figure 14. Major upcoming R&D events Figure 15. Major conferences

Company Date Details Q Conference Details Hanmi JPM Healthcare 4Q20 US approval of Rolontis 1Q Major healthcare investment symposium Conference 4Q20 Announcement of phase 2 (cohort 3) results for poziotinib ASCO-SITC Cancer immunotherapy symposium 1Q21 Initiation of phase 2 trial for co-administration of FLX475 and Keytruda ENDO Endocrine Society 1Q21 US approval of Oraxol Yuhan 4Q20 Submission of application for approval of lazertinib (Korea) 2Q AACR American Association for Cancer Research Initiation of phase 1 trial for YH25724 (US) PES Pediatric Endocrinology Society Dong-A ST 4Q20 Announcement of US phase 1b trial data for DA-1241 ASCO American Society of Clinical Oncology

Green Cross 4Q20 BLA filing for IVIG-SN 10% EULAR European League Against Rheumatism CKD 4Q20 Announcement of phase 2a results for CKD-506 BIO USA Biotechnology Innovation Organization HanAll 1Q21 Announcement of phase 2a results for HL161 WAIHA/TED ADA American Diabetes Association Oscotec 4Q20 Announcement of phase 2a results for SKI-O-703 3Q IASLC International Association for the Study of Lung Cancer MedPacto Announcement of phase 1b/2a data for the co-administration of 4Q20 ESMO European Society for Medical Oncology vactosertib and Imfinzi Announcement of phase 1b/2a data for the co-administration of EASD European Association for the Study of Diabetes 2Q21 Vactosertib and Keytruda 4Q UEGW United European Gastroenterology Week OliX 4Q20 Completion of UK phase 1 trial for OLX101 ACR American College of Rheumatology 4Q20 Filing of US IND application for phase 1 trial of OLX301A SITC Society for Immunotherapy of Cancer Qurient 4Q20 Initiation of phase 2b trial for Q203 AHA American Heart Association Genexine Completion of phase 1b trial for the co-administration of Hyleukin-7 4Q20 and Keytruda ASH American Society of Hematology

Source: Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

Figure 16. Co-administration of vactosertib and Keytruda ( for Figure 17. GX-I7: Clinical data for TNBC presented at the ASCO colon cancer patients) meeting in May 2020

Disease control rate Overall response rate (DCR) (ORR)

33.3% 33.3%

11.0%

0.0%

Vactosertib + Keytruda Keytruda Vactosertib + Keytruda Keytruda

Note: The co-administration and monotherapy were conducted separately. Source: ASCO, Genexine, Mirae Asset Daewoo Research Source: SITC, MedPacto, Mirae Asset Daewoo Research

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3. Benefiting from COVID-19

Domestic biotech firms have been benefiting from COVID-19. The main beneficiaries are developers of COVID-19 vaccines/treatments, relevant CMOs, and test kit companies.

Existing antiviral and anti-inflammatory drugs widely used to treat COVID-19 patients have not been as effective as hoped, raising the need for new treatments and vaccines to be developed. Indeed, multinational pharmas and biotech firms now have a number of COVID- 19 treatment candidates in late-phase clinical studies.

In Korea, the race for COVID-19 treatments is being led by Celltrion. The firm identified coronavirus-neutralizing antibodies in April and proved their efficacy through animal testing in May. The firm aims to complete phase 2 and 3 trials for its COVID-19 treatment candidate by year-end and is targeting a commercial launch in 1H21. Meanwhile, Genexine has begun phase 1/2a trials for its COVID-19 vaccine candidate. We see a high probability of success, given the firm’s proven track record in vaccine development (for cervical cancer) based on the same platform technology.

Korean biotech firms are not so behind in the development race for COVID-19 treatments and vaccines, as multinational pharmas are currently undergoing phase 3 trials. Even if Korean players cede the lead to multinational pharmas, they will likely still have good prospects for commercial success. As many countries will prioritize their own nationals for vaccination, Celltrion’s treatments and Genexine’s vaccines still have the potential to achieve outstanding commercial success.

Figure 18. Global: Status check on development of COVID-19 Figure 19. Celltrion: Status check on development of a COVID - treatments 19 treatment

Drug Developer(s) Phase Month/date Notes

Sarilumab Regeneron/Sanofi Phase 3 Apr. Selection of coronavirus-neutralizing antibodies

Eculizumab Alexion Phase 3 May Effects confirmed in ferrets LY-CoV555 Eli Lilly Phase 3 Jun. Development of cell lines Lenzilumab Humanigen Phase 3

GSK4182136 GSK/VIR Phase 2/3 Initiation of mass production

Siltuximab EUSA Pharma Phase 2 Aug. Phase 1 study approved Tocilizumab Roche/Chugai Phase 2 Sep. Phase 2/3 studies approved Baricitinib Eli Lilly Phase 2 Dec. Phase 2/3 studies to be completed MK-4482 Merck/Ridgeback Phase 2

CT-P59 Celltrion Phase 2/3 1H21 Commercial launch

Source: GlobalData, Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

With a number of COVID-19 treatment/vaccine candidates reaching late-phase clinical trials, a growing number of CMOs have signed large-scale production deals with multinational pharmas. Back in April, Samsung Biologics forged a contract manufacturing deal (worth W440bn) with Vir Biotechnology. SK Chemicals also clinched mega deals with AstraZeneca and Novavax, global leaders in COVID-19 vaccine development.

Fueled by the worldwide shortage of biotech contract manufacturing capacity, shares of biotech CMOs both in Korea and overseas have enjoyed strong rallies in 2020. In Korea, SK Chemicals, BINEX, and Samsung Biologics have gained 367%, 283%, and 58% YTD, respectively. During the same period, Lonza (Switzerland) and WuXi Biologics (China) also posted robust gains (73% and 98%, respectively).

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Figure 21. SK Bioscience (subsidiary of SK Chemical) signed a Figure 20. Samsung Biologics: CMO contracts signed in 2019-20 contract to manufacture Novavax’s COVID-19 vaccine

Contract date Counterparty Value Nov. 2019 Ichnos Sciences W16.3bn Nov. 2019 Asia-based pharmaceutical company pharma W22.5bn Dec. 2019 US-based pharmaceutical company W55.2bn Dec. 2019 Swiss-based pharmaceutical company W52.3bn Apr. 2020 European pharmaceutical company W485bn Apr. 2020 Immunomedics W184.5bn

May 2020 US-based pharmaceutical company W184.2bn Jun. 2020 Swiss-based pharmaceutical company W43.3bn Jun. 2020 Swiss-based pharmaceutical company W246.2bn Jul. 2020 Cilag W341bn Jul. 2020 Cytodyn W57.1bn Aug. 2020 GSK Trading Services W439.4bn Sep. 2020 AstraZeneca W366.3bn

Source: Samsung Biologics, Mirae Asset Daewoo Research Source: Novavax, Mirae Asset Daewoo Research

Figure 22. Share performances of domestic biotech CMOs Figure 23. Share performances of global biotech CMOs

(P) (P) 700 Samsung Biologics SK Chemicals BINEX 450 Lonza WuXi Biologics

600 400 350 500 300

400 250

300 200 150 200 100 100 50

0 0 1/19 5/19 9/19 1/20 5/20 9/20 1/19 5/19 9/19 1/20 5/20 9/20

Source: Quantiwise, Mirae Asset Daewoo Research Source: Bloomberg, Mirae Asset Daewoo Research

In the medtech space, Korean diagnostic kit companies have been able to promote their technologies globally and deliver explosive earnings growth amid the COVID-19 pandemic. YTD, shares of Seegene and LabGenomics have gained 813%, and 589%, respectively.

In the in-vitro diagnostics market, testing machines hold the key to sales growth. In this segment, it typically takes some time for machines to be installed and volume to meaningfully grow. As such, companies that already have extensive customer bases for their diagnostics instruments (machines) are set to benefit the most once demand for test kits grows significantly.

Seegene typically ships around 250 machines per year. In 1H20 alone, however, the company delivered 529 machines. Factoring in order backlogs, we forecast more than 1,000 units to be shipped for the full year. We view the marked increase in the firm’s diagnostic instrument shipments as a key driver behind the recent sharp increase in its COVID-19 testing reagent sales.

Mirae Asset Daewoo Research 12 October 7, 2020 TIGER KRX Bio K-New Deal ETF

Figure 24. Share performances of COVID-19 diagnostic kit Figure 25. Global installations of Seegene’s diagnostic suppliers equipment

(P) (Units) New (L) (Wbn) Seegene Sugentech Existing (L) 1,000 2,500 300 CFX 96-use reagent sales (R) LabGenomics 250 800 2,000 529

255 200 600 1,500 265 150 255 400 1,000 174 1734 100 121 1479 1214 500 200 959 50 664 785

0 0 0 1/20 2/20 3/20 4/20 5/20 6/20 7/20 8/20 9/20 15 16 17 18 19 1H20

Source: Quantiwise, Mirae Asset Daewoo Research Source: Seegene, Mirae Asset Daewoo Research

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IV. Status check and outlook by segment

1. Biosimilars

While biosimilars’ penetration in Europe has increased at a rapid pace, their performance in the US has been much weaker than anticipated. Unlike Europe, the US market is led by private insurers and pharmacy benefit managers (PBMs), and original drugmakers’ aggressive attempts to defend their market presence through exclusive sales contracts and rebates have worked well. Low biosimilar awareness among healthcare professionals and a thin product lineup have also contributed to the slow penetration in the US market.

However, the tide has recently begun to turn with the launch of oncology biosimilars. Amgen’s Mvasi (Avastin biosimilar) and Kanjinti (Herceptin biosimilar) have increased their market shares to 40.3% and 29.8%, respectively, just 14 months after their releases. Celltrion’s Truxima (Rituxan biosimilar) has gained a market share of 17.5% 10 months into its release.

Unlike Inflectra, all of these biosimilars are approved for cancer treatment. In the US biosimilar market, cancer treatments have displayed faster penetration than autoimmune disorder treatments. We believe this is because the cancer segment is characterized by: 1) a relatively low influence from rebates on drug choice; and 2) a lower preference for original drugs among health professionals (compared to the autoimmune disorder treatment segment). We also note that oncology biosimilars are backed by an abundance of clinical data confirming efficacy and safety in line with reference drugs. In addition, Pfizer has noted that there are more new patients requiring treatment for cancer than for autoimmune disorders, creating more opportunities for private insurers and doctors.

We have noted marked changes to biosimilar perceptions among private insurers since Oct. 2019. UnitedHealthcare, the largest private insurer in the US, added Inflectra, Mvasi, and Kanjinti to its preferred product list on Oct. 1, 2019. The insurer also said it preferred biosimilars Zarxio and Retacrit (anemia treatment) over their reference drugs.

In Oct. 2020, UnitedHealthcare included Truxima in its preferred product list and excluded Rituxan (original drug) from the list. We thus expect Truxima’s US market share to continue to rise going forward.

Figure 26. Inflectra: US M/S trend Figure 27. Anti-cancer biosimilars: US M/S trend

Inflectra M/S 45% Mvasi M/S Kanjinti M/S 10% 9.2% 40.3% 9% 40% 8% 35% 29.8% 7% 30%

6% 25% 5% 20% 4% 15% 3% 10% 2% 1% 5% 0% 0% 11/16 6/17 12/17 7/18 2/19 8/19 3/20 9/19 11/19 1/20 3/20 5/20 7/20

Source: Bloomberg, Mirae Asset Daewoo Research Source: Bloomberg, Mirae Asset Daewoo Research

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Meanwhile, despite some concerns about intensifying competition in the biosimilar market, there are not many new entrants. In the US, only a handful of companies—namely Celltrion, Samsung Bioepis, Pfizer, and Amgen—have received approval for antibody biosimilars. While some other companies are conducting phase 3 trials, very few of them are targeting global markets.

Because biosimilar development is essentially a race against time, new players find it difficult to enter the market. The success of Remsima (first Remicade biosimilar) and Truxima (first Rituxan biosimilar) illustrates the need to secure an early lead in the market, particularly because biosimilars need to demonstrate efficacy and safety in line with reference products. The time required for R&D, clinical trials, and approval puts latecomers at a disadvantage.

Moreover, the biosimilar business requires massive investments. Developing a biosimilar drug targeting the US and Europe costs approximately W200bn. The biosimilar products now on the market generally enrolled 600-800 patients in phase 3 clinical studies in Europe at an estimated cost of W60-80bn. It is also necessary to secure large-scale production capacity, as Celltrion and Samsung Biologics have had to do. Establishing in-house production facilities requires huge amounts of capital. Outsourcing to CMOs is an option, but it is costlier than direct production and may risk production scheduling clashes.

Table 3. Major biosimilars approved in the US

Active ingredient Biosimilar Company FDA approval Inflectra Pfizer (Hospira) Apr.2016 Renflexis Samsung Bioepis/Merck Apr.2017 Ixifi Pfizer Dec.2017 Avsola Amgen Dec.2019 Truxima Celltrion/Teva Nov.2018 Ruxience Pfizer Jul.2019 Ogivri Biocon/Mylan Dec.2017 Herzuma Celltrion/Teva Dec.2018 Ontruzant Samsung Bioepis/Merck Jan.2019 Trazimera Pfizer Mar.2019 Kanjinti Amgen Jun.2019 Bevacizumab Mvasi Amgen/Allergan Sep.2017 Zirabev Pfizer Jun.2019 Adalimumab Amjevita Amgen Sep.2016 Cyltezo Boehringer Ingelheim Aug.2017 Hyrimoz Sandoz Oct.2018 Hadlima Samsung Bioepis Jul.2019 Abrilada Pfizer Nov.2019 Hulio Mylan Jul.2020 Source: FDA, Mirae Asset Daewoo Research

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There are surprisingly few companies conducting phase 3 trials that target global markets, and some established players are even exiting the European market due to tougher-than- expected competition and a rapid fall in drug prices. Korean companies are holding their ground, supported by cost competitiveness, but big pharmas are being pushed out of Europe due to high production costs and labor expenses (R&D and sales workforce).

- Pfizer: Pfizer has moved aggressively in the US market, launching biosimilar versions of Avastin, Rituxan, and Herceptin. Pfizer’s Humira biosimilar (Amsparity) received a positive opinion from the European Medicines Agency's (EMA) Committee for Medicinal Products for Human Use (CHMP). In Dec. 2019, however, the company decided not to market the product in Europe due to a change in strategy. The phase 3 clinical study for Amsparity enrolled 597 patients.

- Amgen: In Jun. 2019, Amgen withdrew its marketing authorization application for ABP 710 (Remicade biosimilar) following a change in its European strategy. The phase 3 clinical study for ABP 710 enrolled 558 patients.

- Sandoz: The Novartis subsidiary, a biosimilar powerhouse, received the first biosimilar approval in Europe (for the growth hormone Omnitrope in 2006) and the first biosimilar approval in the US (for Zarxio in 2015). Sandoz was the second company to develop a biosimilar version of Rituxan in the US (after Celltrion), but it gave up on FDA approval. The company did not specify reasons for the withdrawal, but there were reportedly production issues.

- Boehringer Ingelheim: In Nov. 2018, Boehringer Ingelheim suspended biosimilar development outside of the US. The company received EU approval for its candidate adalimumab (Humira biosimilar), but it abandoned plans to launch the product in Europe to focus more on the US. The phase 3 clinical study for the biosimilar candidate enrolled 577 patients (430 patients with and 147 patients with Crohn’s disease).

- Merck KGaA: In Sep. 2017, Merck KGaA divested its biosimilar business to Fresenius Kabi for an up-front payment of EUR156mn and milestone payments of up to EUR500mn, plus royalties on future product sales. Merck KGaA invested EUR230-250mn in the biosimilar business during 2014-15

- Momenta: In Oct. 2018, the company suspended development of five of its seven biosimilar programs, retaining only two (biosimilars of Humira and Eylea). In Aug. 2019, Momenta also dropped its Humira biosimilar (for which a phase 3 study had been completed) and reached a settlement with Humira maker AbbVie, citing: 1) its failure to secure a commercial partner; 2) the existence of multiple competitors; and 3) reallocation of US$100mn to other drug development programs. Currently, Momenta has only one biosimilar (Eylea) in its pipeline.

Table 4. Biosimilar competitors on their way out

Company Strategic shifts Pfizer Decided not to market Humira biosimilar in Europe Amgen Decided not to launch Remicade biosimilar in Europe Boehringer Ingelheim Exited the European biosimilar market Sandoz Decided not to market Rituxan biosimilar in the US Merck KGaA Sold biosimilar business to Fresenius Kabi MSD Decided to spin off women’s health, legacy brands, and biosimilars Momenta Suspended the development of six of its seven biosimilar programs Source: Mirae Asset Daewoo Research

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Humira, the world’s top-selling drug and the only drug with sales exceeding W20tr in 2019, has a strong market lead over its closest competitors. Given its sheer size, the Humira market was expected to become especially coveted by biosimilar producers.

However, only five biosimilars to Humira are currently approved in Europe. Even though Boehringer Ingelheim received European approval for its Humira biosimilar before the main patent on Humira expired, the company decided not to launch the product in Europe. Pfizer also decided not to market its biosimilar in the region; this would have been the sixth one in the market.

The situation is similar in the US. Momenta was the seventh firm to develop a Humira biosimilar, but it failed to secure a commercial partner. (It appears big pharmas did not see a product seventh in line as viable, no matter the size of the market.) Following Pfizer, Coherus also plans to launch a Humira biosimilar, but the company appears too small to pose a serious competitive threat (annual revenue of US$360mn in 2019).

All in all, we believe there will be a maximum of seven key competitors to be reckoned with in the Humira biosimilar market.

Table 5. Status of Humira biosimilars in Europe and the US

Order of Europe US market Date of release as agreed Developer Approval date Developer entry with AbbVie 1 Amgen Mar. 2017 Amgen 1/31/23 2 Samsung Bioepis Aug. 2017 Samsung Bioepis 6/30/23 3 Boehringer Ingelheim Nov. 2017 Boehringer Ingelheim 7/1/23 4 Sandoz Jul. 2018 Mylan 7/31/23 5 Mylan/Fujifilm Kyowa Kirin Sep. 2018 Fresenius Kabi 9/30/23 6 Fresenius Kabi Apr. 2019 Sandoz 9/2023 7 Pfizer Feb. 2020 Momenta 11/20/23 8 Pfizer 11/20/23 9 Coherus 12/15/23 Note: Production has stopped for highlighted items. Source: Mirae Asset Daewoo Research

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2. In-vitro diagnostics

1) A US$61bn market expected to grow at 6.5% CAGR

We project the global in-vitro diagnostics market to grow at 6.5% CAGR through 2025, reaching US$77.7bn (vs. US$61bn in 2020), driven by technological innovation and consumables sales.

a. A business model with high operating leverage

Diagnostics are broadly classified into diagnostic imaging and in-vitro diagnostics. Diagnostic imaging refers to the use of medical imaging techniques such as X-ray, computer tomography (CT), and magnetic resonance imaging (MRI) to obtain images of the inside of the body and make diagnoses. In-vitro diagnostics are clinical tests that analyze samples taken from the body, such as blood, saliva, and urine.

Diagnostics are the largest segment (20%) of the medical devices market. The revenue share of in-vitro diagnostics is steadily growing (while that of diagnostic imaging is decreasing), as the business model is characterized by recurring revenue from consumables. Thanks to consumables, the in-vitro diagnostics business has high operating leverage.

b. Technological innovation

Technological innovation is continuing in in-vitro diagnostics. Various new analysis methods and markers have been developed, and clinical sites are using next-generation sequencing (NGS), polymerase chain reaction (PCR), ultra-fast bacterial identification, and biomarkers. New technologies under development include the application of AI to the adaptive immune response and the analysis of single-cell sequences.

Figure 29. Shares of in-vitro diagnostics and diagnostic Figure 28. Global in-vitro diagnostics market size and growth imaging in overall medical devices revenue

(US$bn) In-vitro diagnostics Diagnostic imaging

77.7 13.3% 13.4% 13.0% 13.1% 13.0% 12.8% 12.5% 61.7 12.4%

11.0%

10.3% 10.5% 10.1% 9.8% 9.8% 9.5%

8.6%

20 25F 11 12 13 14 15 16 17 24F

Source: Research and Markets, Mirae Asset Daewoo Research Source: EvaluateMedTech, Mirae Asset Daewoo Research

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2) Innovative drugs and population aging highlight the role of in-vitro diagnostics

a. Companion diagnostics: Diagnostic testing for innovative cancer therapies

Cancer is one of the leading causes of death, and oncology drugs represent the largest share of the global drug market. Chemotherapy is one of the three standard therapies for treating cancer, but first-generation chemotherapy can have harmful (and even fatal) side effects because it also attacks normal cells. To address such side effects, second-generation (targeted therapy identifying/attacking cancer-specific antigens) and third-generation (immunotherapy) chemotherapy are under development.

Companion diagnostic tests identify whether a patient has a specific gene change or biomarker (PD-L1, TMB, etc.) targeted by certain drugs—without which targeted therapy and immunotherapy have limited results. Accordingly, such tests can prevent the prescription of costly and ineffective treatments. The FDA also recommends that companion diagnostic tests be used in new drug development.

Table 6. Top 10 drugs by sales (US$bn) Rank Product Company Main indications Companion diagnostic product 2019 2026F CAGR Cervical cancer; colorectal cancer; diffuse large B cell lymphoma; gastric cancer; head and neck cancer; PD-L1 IHC 22C3 pharmDx, 1 Keytruda Merck Hodgkin's disease; liver cancer; malignant melanoma; 11.1 24.9 12.2% FoundationOne CDx non-small cell lung cancer; pancreatic cancer; small cell lung cancer; solid tumors; urogenital cancer Colorectal cancer; gastric cancer; head and neck cancer; Hodgkin's disease; liver cancer; malignant melanoma; 2 Opdivo BMS PD-L1 IHC 28-8 pharmDx 8.0 12.7 6.8% non-small cell lung cancer; renal cell carcinoma; urogenital cancer Deep vein thrombosis; pulmonary embolism; stroke; 3 Eliquis BMS - 7.9 12.6 6.8% thromboembolism; venous thromboembolism 4 Biktarvy Gilead HIV-1 infections - 4.7 11.7 13.8% Chronic lymphocytic leukemia; graft -versus -host disease; 5 Imbruvica AbbVie + J&J mantle cell lymphoma; marginal zone B-cell lymphoma; - 5.7 10.7 9.5% Waldenstrom macroglobulinemia 6 Ibrance Pfizer Breast cancer - 5.0 9.7 10.0% Cobas EGFR Mutation Test v2, Guardant360® CDx, FoundationOne 7 Tagrisso AstraZeneca Non-small cell lung cancer 3.2 9.5 16.9% CDx, FoundationOne® Liquid CDx 8 Dupixent Sanofi Asthma; atopic dermatitis; nasal polyps - 2.3 9.4 22.1% 9 Trikafta Vertex Pharma Cystic fibrosis - 0.4 8.7 54.3% 10 Ozempic Novo Nordisk Type 2 diabetes mellitus - 1.7 8.3 25.6% Source: EvaluatePharma, Mirae Asset Daewoo Research

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b. Early diagnosis, an effective way to reduce healthcare costs

The global phenomenon of population aging is invariably accompanied by increases in healthcare demand and costs. According to Korea’s Health Insurance Review and Assessment Service, people age 65 and over represent only 13% of the population covered by national health insurance but account for 40% of insurance benefits paid. In addition, over 80% of people in this age group suffer from one or more chronic diseases.

Against this backdrop, early diagnosis is gaining increasing importance as an efficient way to reduce overall healthcare costs. Exact Sciences, developer of tests for the early detection of colorectal cancer, has demonstrated how early diagnosis can benefit patients and society as a whole. (It is the first company to successfully navigate a pilot program for parallel review by both FDA and Medicare regulators.)

Colorectal cancer is the second leading cause of cancer death in the US. Every year, around 135,000 Americans are diagnosed with colorectal cancer, and 50,000 patients die from it. However, early detection can dramatically increase the survival rate and reduce treatment costs. Since Exact Sciences’ product received approval in 2014, the company has grown to become one of the top 10 in-vitro diagnostics companies (revenue of US$880mn in 2019).

Figure 31. Insurance claims paid and coverage breakdown by Figure 30. Proportion of population aged 65 and over age group

(%) (%) Under 65 65+ 40 Global China Japan Germany US Korea 35

30 60% 25 87%

20

15

10 40% 5 13% 0 15 20F 25F 30F 40F 45F 50F 55F Insurance claims paid Under coverage

Source: OECD, Mirae Asset Daewoo Research Source: Health Insurance Review & Assessment Service, Mirae Asset Daewoo Research

Figure 32. Exact Sciences’ revenue trend Figure 33. Benefits of early diagnosis

(US$ mil) 400 COVID-19 Precision oncology 350 Screening

300

250

200

150

100

50

0 1Q15 1Q16 1Q17 1Q18 1Q19 1Q20

Source: Exact Sciences, Mirae Asset Daewoo Research Source: Exact Sciences, Mirae Asset Daewoo Research

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V. ETF overview

Diversified exposure to new drugs, biosimilars, and diagnostic kits

Holdings of the TIGER KRX Bio K-New Deal ETF include: 1) two biosimilar companies; 2) one biotech CMO; 3) five new drug developers; 4) one diagnostic kit manufacturer; and 5) one pharmaceutical chemical supplier.

The two biosimilar companies held by the ETF are Celltrion (068270 KS) and Celltrion Healthcare (091990 KQ). Celltrion is the world’s largest biosimilar manufacturer; two of its offerings, Remsima and Truxima, are outselling their reference drugs in Europe and gaining share in the US market. Margins are also improving. Remsima SC (released in Europe in 1H20) is set to drive the company’s growth in 2H20-2021, given the improved convenience of administering the drug. Looking further ahead, the company’s high-concentration Humira biosimilar (to be launched in mid-2021) should fuel sustained growth.

The biotech CMO constituent is Samsung Biologics (207940 KS). As the dominant player in the global biotech CMO market, the company is seeking to further widen its market lead, recently announcing a plan to build a fourth plant. We expect the global CMO market to grow at a CAGR of 15%, backed by biologics sales growth and higher CMO demand from multinational pharmas. Biologics manufacturing capacity shortages amid the pandemic are also positive.

The new drug developers held by the ETF are SK Biopharmaceuticals (326030 KS), Yuhan (000100 KS), Hanmi Pharmaceutical (128940 KS), Hanmi Science (008930 KS), and Alteogen (196170 KQ). SK Biopharmaceuticals is the only Korean pharmaceutical company to have two US FDA-approved drugs. As the drugs have been proven superior to rival drugs in clinical trials, we expect to see rapid market penetration next year. (The company is directly involved in marketing/sales in the US market.)

Table 7. TIGER KRX Bio K-New Deal ETF constituents Current Current price P/E (x) EPS growth (%) P/B (x) ROE (%) Company Ticker market cap. (W) (Wbn) 2020F 2021F 2020F 2021F 2020F 2021F 2020F 2021F SK Biopharm 326030 KS 140,500 11,003 -67.03 -298.93 -112 78 25.99 28.47 -73.2 -9.09 Celltrion 068270 KS 254,500 34,356 62.05 47.46 77 30 10.23 8.41 17.35 18.79 Samsung 207940 KS 685,000 45,323 195.16 129.1 15 51 12.07 11.09 5.75 8.96 Biologics Celltrion 091990 KQ 88,300 13,400 44.3 35.46 337 25 6.71 5.6 16.5 17.43 Healthcare Seegene 096530 KQ 279,800 7,340 14.9 15.04 1621 -1 10.98 6.34 121.9 55.17 Alteogen 196170 KQ 181,000 5,083 454.29 649.15 421 -29 62.43 56.96 14.9 9.36 Yuhan 000100 KS 65,100 4,352 21.71 38.45 5 -46 2.18 2.13 11.55 5.86 Hanmi 128940 KS 273,500 3,239 82.53 54.76 -25 49 4.28 4.03 5.79 8.13 Celltrion Pharm 068760 KQ 112,200 4,018 ------Hanmi Science 008930 KS 57,400 3,789 ------Source: Mirae Asset Daewoo Research

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Appendix 1

Important disclosures and disclaimers

Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. and/or its affiliates do not have any special interest with the subj ect company and do not own 1% or more of the subject company's shares outstanding.

Analyst certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws or regulations thereof. Each Analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the personal views of the Analyst about any and all of the issuers and securities named in this report and (ii) no part of the compensation of the Analyst was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director, or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. Like all employees of Mirae Asset Daewoo, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading, and private client divisions. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Daewoo except as otherwise stated herein.

Disclaimers This report was prepared by Mirae Asset Daewoo, a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled in good faith and from sources believed to be reliable, but such information has not been independently verified and Mirae Asset Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein or of any translation into English from the Korean language. In case of an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws, and accounting principles, and no person whose receipt or use of this report would violate any laws or regulations or subject Mirae Asset Daewoo or any of its affiliates to registration or licensing requirements in any jurisdiction shall receive or make any use hereof. This report is for general information purposes only and is not and shall not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The report does not constitute investment advice to any person, and such person shall not be treated as a client of Mirae Asset Daewoo by virtue of receiving this report. This report does not take into account the particular investment objectives, financial situations, or needs of individual clients. The report is not to be relied upon in substitution for the exercise of independent judgment. Information and opinions contained herein are as of the date hereof and are subject to change without notice. The price and value of the investments referred to in this report and the income from them may depreciate or appreciate, and investors may incur losses on investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. Mirae Asset Daewoo, its affiliates, and their directors, officers, employees, and agents do not accept any liability for any loss arising out of the use hereof. Mirae Asset Daewoo may have issued other reports that are inconsistent with, and reach different conclusions from, the opinions presented in this report. The reports may reflect different assumptions, views, and analytical methods of the analysts who prepared them. Mirae Asset Daewoo may make investment decisions that are inconsistent with the opinions and views expressed in this research report. Mirae Asset Daewoo, its affiliates, and their directors, officers, employees, and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Mirae Asset Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making, or other financial services as are permitted under applicable laws and regulations. No part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Mirae Asset Daewoo. For further information regarding company-specific information as it pertains to the representations and disclosures in this Appendix 1, please contact [email protected] or +1 (212) 407-1000.

Distribution United Kingdom: This report is being distributed by (UK) Ltd. in the United Kingdom only to (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (ii) high net worth companies and other persons to whom it may lawfully be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as “Relevant Persons”). This report is directed only at Relevant Persons. Any person who is not a Relevant Person should not act or rely on this report or any of its contents. United States: Mirae Asset Daewoo is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This report is distributed in the U.S. by Mirae Asset Securities (USA) Inc., a member of FINRA/SIPC, to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6(b)(4) under the U.S. Securities Exchange Act of 1934, as amended. All U.S. persons that receive this document by their acceptance hereof represent and warrant that they are a major U.S. institutional investor and have not received this report under any express or implied understanding that they will direct commission income to Mirae Asset Daewoo or its affiliates. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed herein should contact and place orders with Mirae Asset Securities (USA) Inc. Mirae Asset Securities (USA) Inc. accepts responsibility for the contents of this report in the U.S., subject to the terms hereof, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor. Under no circumstances should any recipient of this research report effect any transaction to buy or sell securities or related financial instruments through Mirae Asset Daewoo. The securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements. Hong Kong: This report is distributed in Hong Kong by Mirae Asset Securities (HK) Limited, which is regulated by the Hong Kong Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person. All other jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Mirae Asset Daewoo or its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Mirae Asset Daewoo and its affiliates to any registration or licensing requirement within such jurisdiction.

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Mirae Asset Securities (USA) Inc. Mirae Asset Wealth Management (USA) Inc. Mirae Asset Wealth Management (Brazil) CCTVM 810 Seventh Avenue, 37th Floor 555 S. Flower Street, Suite 4410, Rua Funchal, 418, 18th Floor, E-Tower Building New York, NY 10019 Los Angeles, California 90071 Vila Olimpia USA USA Sao Paulo - SP 04551-060 Brazil Tel: 1-212-407-1000 Tel: 1-213-262-3807 Tel: 55-11-2789-2100

PT. Mirae Asset Sekuritas Indonesia Mirae Asset Securities (Singapore) Pte. Ltd. Mirae Asset Securities (Vietnam) LLC Equity Tower Building Lt. 50 6 Battery Road, #11-01 7F, Saigon Royal Building Sudirman Central Business District Singapore 049909 91 Pasteur St. Jl. Jend. Sudirman, Kav. 52 -53 Republic of Singapore District 1, Ben Nghe Ward, Ho Chi Minh City Jakarta Selatan 12190 Vietnam Indonesia Tel: 62-21-515-3281 Tel: 65-6671-9845 Tel: 84-8-3911-0633 (ext.110) Mirae Asset Securities Mongolia UTsK LLC Mirae Asset Investment Advisory (Beijing) Co., Ltd Beijing Representative Office #406, Blue Sky Tower, Peace Avenue 17 2401B, 24th Floor, East Tower, Twin Towers 2401A, 24th Floor, East Tower, Twin Towers 1 Khoroo, Sukhbaatar District B12 Jianguomenwai Avenue, Chaoyang District B12 Jianguomenwai Avenue, Chaoyang District Ulaanbaatar 14240 Beijing 100022 Beijing 100022 Mongolia China China

Tel: 976-7011-0806 Tel: 86-10-6567-9699 Tel: 86-10-6567-9699 (ext. 3300) Shanghai Representative Office Ho Chi Minh Representative Office 38T31, 38F, Shanghai World Financial Center 7F, Saigon Royal Building 100 Century Avenue, Pudong New Area 91 Pasteur St. Shanghai 200120 District 1, Ben Nghe Ward, Ho Chi Minh City China Vietnam

Tel: 86-21-5013-6392 Tel: 84-8-3910-7715

Mirae Asset Daewoo Research 23