May 06, 2024

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[THE INVESTOR] Celltrion Healthcare, the distribution unit of biosimilar developer Celltrion, seeks to become a biotech heavyweight with its planned initial public offering, but it could face pricing hurdles as some investors are doubtful whether it can justify its high valuation.

The company’s share market flotation, slated to take place between April and June, is expected to give Celltrion Healthcare an estimated valuation of about 6 trillion won (US$5.07 billion), one of the largest offerings in the biopharma sector following Samsung BioLogics’ share sale in November.

Celltrion Chairman Suh Jeong-jin

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The Celltrion affiliate filed a preliminary application to list its shares on the secondary KOSDAQ market in December.

But the valuation is a stumbling block that the company could encounter as Korean institutional investors have different perspectives on its growth potential.

According to a survey, conducted on 11 Korean institutional investors, 63 percent of respondents said Celltrion Healthcare’s post-IPO market capitalization would be below 5 trillion won with 25 percent saying it would be less than 3 trillion won, according to Money Today.

The asset managers are wary that Celltrion Healthcare may face difficulties to attract investors as its two affiliates Celltrion Pharm and Celltrion are already listed on the KOSDAQ market and it could reduce investor appetite.
In fact, Celltrion Healthcare had sought to get listed on overseas stock markets such as NASDAQ for that reason.

“It is hard to estimate the actual value of Celltrion Healthcare because it overlaps with that of Celltrion,” an industry source said.

The earnings and prospects of Celltrion Healthcare are highly dependent on Celltrion as the former conducts worldwide marketing, sales and distribution of biosimilar products developed by the latter, including biosimilar replications of top-selling drugs like Herceptin, Rituxan and Remicade.

Celltrion Healthcare’s large inventory of unsold drugs, which was purchased from Celltrion, is another issue that institutional investors are concerned about.

Its inventory had grown to over 1.3 trillion won in 2015 but the company said it will offload the products as its drug-making affiliate recently entered the lucrative US market with Remicade copycat.

In the first nine months of 2016, Celltrion Healthcare’s sales and net profit reached 320.3 billion won and 20.6 billion won, respectively.

Mirae Asset Daewoo and UBS were named as lead managers for the IPO.

By Park Han-na (hnpark@heraldcorp.com)