[Click eStock] "Celltrion, Expecting Increased Demand for Biosimilars... Target Price Up"

[Asia Economy Reporter Oh Ju-yeon] Kiwoom Securities analyzed on the 11th that "Celltrion's operating profit in the first quarter slightly missed market expectations, but from the second quarter, operating profit margin is expected to enter the 40% range due to improved factory production efficiency," and "the rise in unemployment rates in the US and Europe caused by the novel coronavirus infection (COVID-19) will eventually lead to increased demand for biosimilars with strong price competitiveness." Accordingly, Kiwoom Securities maintained a 'Buy' rating on Celltrion and raised the target price to 260,000 KRW by applying the increased value of Celltrion Pharm.

Kiwoom Securities evaluated that Celltrion recorded sales of 372.8 billion KRW and operating profit of 120.1 billion KRW in the first quarter of this year, with sales exceeding consensus by 6% and operating profit falling short by 9%.

Researcher Heo Hye-min stated, "The cost ratio in the first quarter was 50%, about 10 percentage points higher than the same period last year, as it was before the full effect of Lonza CMO's initial PV (Process Validation) batch production inventory impact and the first factory efficiency improvement appeared," and analyzed, "Compared to the previous quarter, it fell by 1.3 percentage points, confirming that the cost ratio improves as the quarter progresses." He added, "During the first quarter, Truxima was moved back to the highly efficient second factory, and the initial production impact of Lonza CMO decreased, so a decline in the cost ratio is expected."

Regarding non-operating items, it was diagnosed that foreign currency liabilities related to exchange rate fixing and hedging for raw material purchases positively affected other income and financial income due to the recent rise in exchange rates.

Sales in the second quarter are expected to reach 397.7 billion KRW, and operating profit 156.7 billion KRW, increasing by 69% and 88% respectively compared to the same period last year.

Researcher Heo explained, "On March 27, a private contract worth 347.7 billion KRW was signed with Celltrion Healthcare for the second quarter in transactions of goods and services with affiliated companies including the same person, and growth in the chemical business division is also expected, projecting high sales growth," and added, "Truxima was shifted to the highly efficient second factory during the first quarter, and Lonza CMO PV batch production is expected to decrease as the quarter progresses, improving factory efficiency." He expected that although the CMO supply of Ajovy, a migraine treatment from Teva, which is presumed to have relatively low margins, is expected in the second half of the year, it will be offset by increased factory efficiency.

Researcher Heo expressed expectations that "the COVID-19 treatment under development is expected to show preventive effects while maintaining efficacy for about three months, and clinical trials are expected to begin after IND approval at the end of July." He added, "The antibody diagnostic kit is expected to complete clinical trials in mid to late May and aims for European CE certification in June," and said, "Due to the rise in unemployment and other factors caused by COVID-19, patients and governments burdened by medical expenses and healthcare finances may continue to increase demand for biosimilars, maintaining a positive outlook on the biosimilar industry."

This content was produced with the assistance of AI translation services.