April 27, 2024

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[THE INVESTOR] Celltrion Healthcare is scheduled to go public in April on the secondary KOSDAQ market where its parent company Celltrion boasts the top market cap.

The initial public offering of the company, which sells  Celltrion’s biosimilars -- cheaper, near-replicas of blockbuster biologic drugs -- like Remsima and Truxima, is attracting much attention from investors hungry for bio stocks following Samsung BioLogics' strong debut in November. 

1. IPO valuation

Celltrion Healthcare may seek to raise about 600 billion won (US$518 million) to 800 billion won through its share sale that would value the company at 5-6 trillion won.

The major financial investors of the firm said that Celltrion Healthcare’s fair valuation would be 60 percent of Celltrion’s market capitalization -- of 11.5 trillion won -- putting it at more than 6 trillion won. 


Related:
Investors question Celltrion Healthcare spin-off
Celltrion pledges rapid growth with biosimilars in 2017


2. Self-made billionaire to get even richer

Celltrion founder and chairman Seo Jung-jin will reap the most rewards from the IPO launch. He holds a 44.5 percent stake in Celltrion Healthcare. According to Forbes’ billionaire list, Seo is the 11th richest man in South Korea with personal assets of US$2.2 billion.


3. Merger with Celltrion after IPO

It is highly expected that Celltrion Healthcare will merge with Celltrion after going public.

In an interview in January this year, Celltrion CEO Kim Hyong-gi hinted at a consolidation of the two companies for the change to a holding company structure.

Chairman Seo also mentioned about potential marriage between the production and distribution units in a shareholders meeting last year.


4. Three cash cows

Celltrion Healthcare’s business model entirely relies on Celltrion’s overseas sales.

Celltrion is targeting the European and US markets with its less expensive alternatives to the branded originals. Its first biosimilar Remsima -- referencing Johnson & Johnson’s drug Remicade -- is quickly penetrating the lucrative markets while Truxima has just been cleared for marketing in European countries. Celltrion’s Herceptin Biosimilar Herzuma was submitted for approval in Europe in November.

It forecasts the trio will generate more than 3 trillion won in two or three years when sales of Truxima and Herzuma are in full swing.


5. Unsold drugs, unsolved problem

Celltrion Healthcare’s inventory control has been embroiled in controversy for years.

A massive amount of unsold inventory has been piling up over the last six years, standing at 1.3 trillion won as of 2015.

The inventory of unsold drugs in Celltrion Healthcare’s warehouse is known to be mainly that of Remsima which the company purchased from Celltrion.
Given that Remsima last six years past the sell-by date, it needs to offload the products soon. The company seems to be confident of decreasing Remsima inventories as Celltrion started selling it in the US in November last year after getting approval from the US Food and Drug Administration.

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