Korea Biomedical Review is publishing a series of articles to analyze the top 10 Korean pharmaceutical and biopharma companies with the largest market capitalizations listed on the main bourse, Kospi, and the tech-heavy Kosdaq. The series aims to reflect key industrial issues and the flow of the capital market in the Korean pharmaceutical and biopharma industry. This is the third installment. -- Ed.

A local analyst has predicted that Celltrion's fourth-quarter earnings will be lower than market expectations.

NH Investment & Securities Park Byung-gook estimated Celltrion's sales in the fourth quarter of last year to be 569 billion won ($447.5 million), down 8.5 percent from the same period last year, and operating profit to be 187.8 billion won, down 15.4 percent.

Still, his brokerage maintained a "buy" opinion on Celltrion's shares with a target price of 240,000 won.

"Excluding one-off unrealized gains (related to the sale of a stake in the U.S. subsidiary to Celltrion Healthcare) in the third quarter, fourth quarter sales should grow compared to the last quarter," Park said. "Overall operating profit margin in the fourth quarter is expected to rise slightly due to unrealized profits, but biosimilar-specific margins are projected to decline due to Lonza's contract manufacturing organization (CMO) volume."

As a result, Park predicted that the total sales in 2022 to increase by 9.3 percent to 2.361 trillion won and operating profit to decrease by 1.9 percent to 743 billion won.

"The operating margin is expected to drop from 39.6 percent in 2021 to 31.5 percent in 2022," Park said.

However, this year, Park stressed that he expected stable earnings growth and evaluated the stock as attractive.

In 2023, Celltrion's sales are expected to reach 2.58 trillion won, up 9.3 percent from last year, and operating profit up 17.7 percent to 874.4 billion won, Park said. 

Based on sales from Celltrion Healthcare, which markets Celltrion's products overseas, Remsima SC (ingredient: infliximab), a biosimilar referencing Janssen's Remicade to treat autoimmune diseases, in Europe is expected to generate sales of 368.5 billion won, and Yuflyma (ingredient: adalimumab), a biosimilar referencing AbbVie's Humira in treating autoimmune diseases, sales of 133.4 billion won in all regions, he explained.

Additional growth in the first half is expected to be led by these two products, Park added.

While 2023 is a year that Celltrion would need to use to prepare for big growth after 2024, the stock is still an attractive option, he said.

"There are still risks regarding the approval of Yuflyma in the U.S., and approval prior to the standard release is absolutely necessary," Park said.

Transforming into a new drug developer beyond a strong player in biosimilars

Celltrion is preparing for a drastic change from a biosimilar developer to a new drug developer by securing a new growth engine through the development of various new antibody drugs.

Based on the strategy of selecting and fast-following promising targets among early development materials, the company is developing several antibody pipelines. Some treatments are being developed to maximize synergies with biosimilars under follow-up development.

In addition, Celltrion is accelerating its development to secure a pipeline in the field of anticancer drugs for antibody-drug conjugates (ADCs).

The company is carrying out various open innovations with Korean and foreign companies to secure ADC development platforms and pipelines.

In October of last year, Celltrion signed a contract with Pinot Bio, a Korean biotech company, to introduce the latter's ADC linker-payload platform technology.

Under the agreement, Celltrion paid upfront of 1 billion won and secured the right to use PINOT-ADC for up to 15 separate cancer targets, and plans to develop ADC anticancer drugs targeting solid cancer by applying PINOT-ADC technology to its pipeline candidates under development.

Celltrion is also strengthening its competitiveness in the field of anticancer drugs by expanding its anticancer drug portfolio through collaboration and investment with Korean and foreign biotech companies, such as investing in Iksuda Therapeutics, a British ADC developer.

The company recently announced that it increased its stake in Iksuda Therapeutics to 47.05 percent through direct investment and Mirae Asset-Celltrion New Growth Fund 1 on Jan. 25.

As a result, Celltrion and the new growth fund rose to become the largest shareholders of Iksuda.

The company has also begun full-fledged formulation development to develop an oral antibody treatment with Rani Therapeutics, a U.S. biotech company.

Celltrion, which will participate as a co-developer, plans to jointly develop oral Ustekinumab treatment (original: Stelera) using Rani's capsule platform technology that converts injectable protein and antibody drugs into oral form.

Celltrion expects to secure an innovative drug delivery platform throughout the product pipeline through the partnership.

Meanwhile, Celltrion plans to complete the construction of its Global Biotechnology Research Center this year and accelerate product R&D and innovation.

The Global Biotechnology Research Center is a one-stop large-scale research center for complex R&D, process development, and clinical trials.

Move-in will begin in April, and more than 300 R&D staff are expected to work from the site.

Legal concerns remain

Despite the rosy outlook, Celltrion has recently been embroiled in a lawsuit with Humasis, a local Covid-19 diagnostic kit developer, over the termination of the supply contract for Covid-19 diagnostic kits.

The lawsuit follows Celltrion terminating a contract to supply Humasis' at-home Covid-19 antigen diagnosis kit in December last year.

Initially, the two companies had signed a contract worth $114.78 million on Jan. 22, 2022.

Then, Humasis said it only received $37.52 million out of the $114.78 million and filed a lawsuit against Celltrion, claiming 120 billion won for the remaining diagnostic kits and damages caused by Celltrion's actions on Jan. 26.

In response, Celltrion filed a lawsuit against Humasis on Jan. 31, claiming damages and refund of advance payments as it suffered damages due to Humasis not meeting the delivery date of the Covid-19 diagnostic kit.