Seo Jung-jin “Celltrion’s annual sales target of 12 trillion… Expected to be 4 trillion with new drugs”

August 17, 2023 0 Comments

Seo Jeong-jin, chairman of the Celltrion Group, announced that it expects sales of the combined corporation to reach 12 trillion won through mergers with major affiliates in 2030. This is the result of continuous expansion of biosimilars (generic biopharmaceuticals) products, which are currently the main business, and continuous expansion of new drug pipelines (new drug candidates). The funds secured through the merger are also actively used in mergers and acquisitions ( M&A ) to become a comprehensive bio company with the entire process from drug development to production and sales.

Chairman Seo Jeong-jin held a press conference after the board of directors of Celltrion and Celltrion Healthcare decided on the merger on the 17th and said, “As a result of simulating the future of the merged corporation from various angles, I was convinced that it was a good decision, so the board of directors of both companies confirmed it.”

Celltrion Group currently has a structure in which the holding company Celltrion Holdings controls the so-called ‘Celltrion 3 brothers’, including Celltrion, Celltrion Healthcare, and Celltrion Pharmaceuticals. Chairman Seo owns 98% of Celltrion Holdings. If Celltrion merges with Celltrion Healthcare as planned, Celltrion Holdings will own a 21.5% stake in the merged corporation. In addition, the combined corporation will secure a 54.8% stake in Celltrion Pharm. Chairman Seo’s stake in the integrated corporation is 3.7%.

Chairman Seo predicted sales of 12 trillion won in 2030 after the merger of the three Celltrion companies. “We expect (sales) to come from biosimilars for 60% and new drug pipelines for the remaining 40%,” he said.

The intention is to add new drugs developed in-house to the flagship biosimilars. The first product is ‘Zimpentra’ (US name for Remsima SC ), which is expected to be approved in the US in October. Chairman Seo said, “77% of patients who have already used the product in Europe are satisfied with the convenience and efficacy. In 2024, the sales target of Zimpentra is 700 billion won, and it is set at 3 trillion won within 3 years. Actively involved in

M&A . Chairman Seo said at a press conference in March of this year, “We will be able to execute funds at the end of the third quarter by compressing about 10 companies in the first half.” Chairman Seo said on the same day, “ We are preparing for M&A , and we are watching several companies by combining the cash assets and recognized funds of Celltrion and Celltrion Healthcare, and we are actually discussing intentions.” ” he said. The following is a question and answer.

─I wonder why the two companies merged first, rather than the three companies at the same time.

“When we worked with the three companies at the same time, we expected a lot of difficulties in the process. I thought that mutual interests between shareholders would become complicated. As the first step, it decided to merge Celltrion and Celltrion Healthcare. We will pursue the second phase of the merger in six months. We will leap forward as a comprehensive pharmaceutical bio company that encompasses chemicals as well.”

─Is there any possibility of revaluing Celltrion Healthcare’s inventory after the merger? “Currently , it is estimated that

Celltrion Healthcare has 2.3 trillion to 400 billion won in inventory. Inventory will be in Celltrion’s inventory cost and also in healthcare, but if sales start in the second half of the year, all inventory costs will come close to Celltrion’s next year. The merger does not mean neglecting healthcare inventory. I think the inventory price will gradually decrease as Celltrion Healthcare purchase inventory is the average price based on Celltrion inventory purchase cost. Estimated 2024 EBITDA (operating profit before amortization) at 1.6 trillion won. Everything is melted in this number.”

─Changes in SG&A expenses after the merger.

“SG&A expenses consist of fixed and variable costs. Fixed cost is the cost of establishing a direct sales network. By the first half of this year, direct sales networks were almost completed in the US, Canada and Australia. I don’t think there will be a significant increase in fixed costs going forward. However, as sales increase, variable SG&A expenses such as wholesaler commissions may increase. In order to make it a number that reflects all of this, Evita said that it will be about 1.6 trillion won in 2024. In 2025, the Evita rate is about 56%, and in 2026, it is looking at about 64%. It is a target number, but we will work hard to achieve it.”

─How much is Celltrion’s sales excluding Celltrion Healthcare? “ I think

the sum of all Celltrion sales in 2023 is about 2.1 trillion to 200 billion won. Healthcare sales are about 2.3 trillion won.”

─What are the long-term gross profit and short-term gross profit projections after the merger?

“There are some costs that are amortized in 2024. Among the intangible assets of healthcare, it is part of copyright. Then, some operating profit will decrease. After that, I don’t think there will be any impact in 2025 or 2026. Zimpentra, which is expected to be approved in October this year, will be sold at least four times more expensive than biosimilars. And it’s protected for 15 years, and there’s little concern about price cuts on the original product. I believe that the future sales and structure of the merged corporation will be better than now.”

─How to resolve shareholder complaints about the merger?

“If the merger between the two companies is completed within this year, we will pursue the second phase of the merger within six months. We will keep the big principles in the merger of the three companies as promised.”

─Is the merger and succession of the two companies related?

“The merger is proceeding because shareholders wanted it and many investors recommended it. We are not pursuing the merger because of our own interests.”

─What is the plan to reduce personnel after the merger?

“Our group does not have a restructuring plan to reduce manpower. Basically, there is no overlapping manpower. So there is no restructuring plan.”

─Expected amount of appraisal right limit.

“At the time of the merger, the board of directors of both companies decided to limit the stock purchase right to 1 trillion won. We will receive appraisal rights within the limit of 1 trillion won, and we will present it to the shareholders’ meeting on the premise of this.”

─ M&A plans.

“ We are preparing for M&A , and will combine short-term안전놀이터 mobilizable cash assets of both companies with personal funds. I’m watching a few companies and I’m in the middle of the doctor. When the implementation phase is reached, we will notify you through public notice.”

─Is this merger a measure to boost stock prices?

“Mergers are not artificial. report synergies. Resolutions are not made by the board of directors or major shareholders. That’s what shareholders do. I will end it early in the shortest time. We will also reorganize the chemical business so that shareholders can judge, so that the merger will be welcomed by shareholders.”

─What is the scale of intangible assets and amortization expenses?

“Among intangible assets, copyright becomes depreciable property. We are negotiating standards with accounting firms. The target performance shared today was carefully calculated. We expect an operating margin of 45% in 2025 and more than 50% in 2026.”

─Can a merger be pursued if the appraisal right limit exceeds KRW 1 trillion?

“In principle, the limit was set at 1 trillion won. But I think 1 trillion won is enough. This is because the stock is currently undervalued. What will you do when it comes out over 1 trillion won? I also have a plan for when that happens. But I don’t think it will come out more than 1 trillion won.”

─Where do you secure materials to start clinical trials for new drugs developed in-house from 2024?

“We are already conducting preclinical trials for new drugs. It is scheduled to enter human phase 1 clinical trials next year. It will follow in 2025. It can be understood that institutional investors and new drug candidates such as immuno-anticancer drugs introduced at overseas IRs (company briefings) are all included.”

─The ratio of Jim Pentra’s target sales in 2024 is

“We expect about 700 billion won in 2024 in Korean money. More than 3 trillion won in the future. By 2030, we expect to develop about one more new drug.”

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