Investors calmed Thursday after frenzied selloff in Celltrion Inc. upon a massive downgrade by JP Morgan as the Korean biotech firm strongly challenged the U.S. investment bank in its grounds for shaving stock target price by 40 percent.

Celltrion shares ended Thursday flat at 298,500 won ($251.79) after dipping 6 percent on the previous day while its marketing arm Celltrion Healthcare rebounded 3.55 percent to finish the day at 102,100 won. Both stocks tumbled Wednesday on JP Morgan’s report recommending Celltrion’s target stock price at 190,000 won, which was more than 40 percent lower than its closing price of 318,000 won on Tuesday.

It also recommended the target price of Kosdaq-listed Celltrion Healthcare at 70,000 won, which is down 32 percent from the stock’s closing price of 103,100 won on Tuesday.

JP Morgan reasoned that there exist structural downward risks in Celltrion stock after the stock has rallied 76 percent since the beginning of this year, outperforming 9 percent gain of the Kospi over the same period.

The bank cited intensifying competition in the biosimilar industry that will lead latecomers and original drug makers to fall in a vicious cycle of cutting product prices, which, in return, would deteriorate Celltrion’s profits.

It also noted the company’s growth in the European market has plateaued while inventories at Celltrion Healtcare stockpiled to 1.8 trillion won.

Celltrion in a statement questioned the reliability in JP Morgan’s negative view on its stock as the bank had recommended “hold” on shares of a local rival whose price-to-earnings (P/E ratio) is much higher at 158x than Celltrion’s 76x and Celltrion Healthcare’s 57x.

P/E ratio measures stock price against a company’s earnings per share. A high P/E ratio could mean that a company`s stock is over-valued.

JP Morgan’s target prices for Celltrion and Celltrion Healthcare also are too low compared with those presented by local brokerages who reflected Celltrion’s second quarter earnings results in their latest stock recommendation on the two companies. The average of the Korean brokerages’ price targets for Celltrion hover around 360,000 won, with Hanwha Investment & Securities even projecting Celltrion shares to trade as high as 450,000 won.

By Woo Je-yoon and Cho Jeehyun

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