Celltrion To Invest $33.6bn As It Lays Out Long-Term Ambitions
Executive Summary
Celltrion unveils massive long-term investment plan to secure leadership in the global biopharma market, set up international sales distribution networks and support new bioventures and job creation, in the meantime contributing to Korea’s larger ambitions to develop as a worldwide drug industry hub.
Celltrion Inc., which has recently announced plans to establish its own global direct sales and distribution networks to seek further growth and improve margins, aims to invest a massive KRW40tn ($33.6bn) over the next 10 years in both biologics and chemical drugs, and in worldwide healthcare and U-healthcare (ubiquitous healthcare) platform businesses under a new long-term road map.
“Celltrion Group feels responsible as a leading South Korean biopharma firm and will focus on businesses that can beef up the competitiveness of the country’s healthcare industry and set a vision,” group chairman Jung Jin Seo declared in a statement.
The new plan, running out to 2030, focuses on securing leadership in the global biopharma market, creating about 110,000 new jobs and setting up a truly international distribution network, as well as Seo's stated intent of helping South Korea develop as a center of the global biological and chemical drug industry.
During this process, the group aims to establish a "healthcare valley" project with cooperation from Incheon city and Chungcheongbuk-do province in Korea, to seek and fund open innovation initiatives and invest in bioventures to reinvigorate the country’s broader bio-ecosystem.
The biosimilar specialist’s huge investment plan is part of its long-term goal to become a major integrated global biopharma firm, and also comes as South Korea has selected the biotechnology industry as one of its new economic growth engines. Celltrion announced in January that it would set up its own global direct sales and marketing system to support the next stage of growth.
Multi-Sector Investment Plans
Under the plan, Celltrion plans to invest KRW25tn in its core biologics business, based in Songdo, Incheon, KRW5tn in its chemical drug business headquartered in Ochang, North Chungcheongbuk-do province, and KRW10tn in the global healthcare and U-healthcare platform operations.
In the biologics sector, the aim is to set aside KRW16tn to develop more than 20 second-generation biosimilars, including in the immuno-oncology field, and to secure new drugs with novel mechanisms of action.
In addition, the company will invest KRW5tn in supporting facilities to manufacture one million liters of active pharmaceutical ingredients for biologics annually and will establish an environment to manufacture 100 million vials of finished products annually. KRW4tn has been earmarked to establishing global distribution networks and supporting bioventure start-ups.
More specifically, the firm aims to establish direct sales and distribution networks in Europe by 2019, in Asia and South America by 2020 and in North America by 2021.
The expanded chemical drug business will be led by Celltrion Pharm located in Ochang, South Korea, and the plan is to build a pipeline of about 50 projects and develop new assets through both in-licensing deals and in-house development. To this end, the new road map calls for total spending of KRW4tn in R&D and another KRW1tn in building manufacturing facilities. The group plans to hire about 2,000 R&D staff and another 8,000 for its biologics and chemical drug manufacturing facilities.
The blueprint for the U-healthcare business calls for investing in platform technology as well as in medical data and artificial intelligence. Celltrion plans to invest KRW4tn to collect and use medical big data and to develop an e-commerce platform that can link the diagnosis, prescription and distribution process. It also plans to invest about KRW6tn in development and production of diagnostics to help in the collection of the medical data needed for customized and precision medicine.
Entry into these healthcare businesses is expected to indirectly create 100,000 new jobs.
Sources Of Funding
While the plans are ambitious, Celltrion says it will tap into a variety of sources to support the targeted investments. It aims to raise about KRW10tn of the total from external investors and also to use to its future operating profit. “Our accumulated operating profit will amount to about KRW32tn, or 40% of sales, by 2030,” Seo was quoted as saying by local media.
Helped by steadily increasing market share for the biosimilars Truxima (rituximab) and Herzuma (trastuzumab) in Europe, Celltrion posted an operating profit of KRW77.4bn and sales of KRW221.7bn, on a consolidated basis in the first quarter of this year. Its operating profit ratio rose by 16.8 percentage points quarter-on-quarter, to 35% in the first quarter.
According to IQVIA, the market share of Remsima (biosimilar infliximab) in Europe stood at 57%, while that of Truxima and Herzuma was 36% and 10%, respectively, at the end of 2018, suggesting the products are rapidly carving out a strong position.
Celltrion also cited the supply of the subcutaneous version of Remsima as another factor that improved its profitability in the quarter. The formulation was filed for approval in the EU last November and is poised to receive marketing authorization in the near term, so the company has already begun to supply the product.
Celltrion is also aiming to set up a joint venture in China within the first half of this year to help proceed with clinical trials, product approvals and local sales of its biosimilars. It is planning to make investments in biological drug manufacturing facilities in China via financial firms, the company said.
As far as the global chemical drug business goes, the company has so far received US FDA approvals of Temixys (lamivudine/tenofovir disoproxil fumarate) for HIV-1, and the antibiotic linezolid.