HONG KONG – Celltrion Inc., a South Korean biopharma known for Remsima (infliximab), the first biosimilar monoclonal antibody to gain EMA approval, plans to invest more than $33 billion over the next decade to build itself into a top global player and develop Korea as a biomedical hub.

Jungjin Seo, the founder and chairman of the company, said the firm had set up plans to invest KRW40 trillion (US$33.5 billion) by 2030. Those investments would carry through even after his retirement in the late 2020s.

Celltrion plans to pour the money into three sectors.

The first is a biomedical business centered in Songdo, Incheon, in which the company plans to invest KRW25 trillion to develop more than 20 second-generation biosimilars to treat cancer and expand its biomedicine efforts. Funds also will be used to expand its production facilities and build a network of direct sales in Europe, South America, Canada and the U.S.

The company is already negotiating with the government of Incheon city and Samsung Biologics Co. Ltd., another top biosimilar company in Korea, to expand factories and R&D facilities based in Songdo. Celltrion also expects to expand its manufacturing capacity by as much as 330,000 square meters so that its three factories can produce as much as 360,000 liters per year.

The second sector for expansion is chemical medicines out of the company's facilities in Ochang, Chungbuk Province. That project will operate about 50 pipelines and develop new drugs through in-licensing based on R&D and manufacturing.

The third sector will tap into big data and artificial intelligence to expand the company's medical services and devices platform.

The ambitious plan, however, has attracted some criticism, with observers questioning whether the company can afford to invest that much money.

Celltrion has only KRW1 trillion in resources available immediately, after issuing bonds worth around KRW400 billion and cash in hand worth KRW1.4 trillion. It also has KRW700 billion in debt as of May 20.

The company has said the massive investment budget is based on future earnings. Celltrion expects its operating profit by 2030 will be a cumulative KRW32 trillion, about 40% of sales. From the operating profit, the company is going to pull KRW30 trillion for the investment.

"Most of the investment fund will come from our operating profits," a Celltrion spokesman told BioWorld Asia.

The company is also expecting to benefit from a number of commercial launches of about 15 biosimilar products, including biosimilars of Avastin (bevacizumab), Lucentis (ranibizumab), Stelara (ustekinumab). The patents for those drugs expire between 2020 and 2030. Currently, Celltrion's annual sales are about KRW1 trillion.

In addition, the firm has said it would fund KRW10 trillion from external investment.

Chairman Seo said the aim is to build a virtual ecosystem of pharmaceutical businesses and make Songdo a bio-valley of Korea.

"If we combine the biosimilar production bases of Celltrion and Samsung Biologics in Songdo, it will be bigger than Genentech Inc., which has the world's largest production facilities. We will attract foreign companies to Korea as the country will become the largest buyer," said Seo.

Doubts remain

But, beyond the doubts of Celltrion's own ability to invest that much money, there are doubts that Samsung Biologics will be able to invest in the facilities.

Samsung Biologics has also been hit by a fraud scandal linked to inflated values from its subsidiary Samsung Bioepis Co. Ltd. Taehan Kim, CEO of Samsung Biologics, was summoned by prosecutors on May 20. (See BioWorld, May 6, 2019.)

"While Celltrion has grown its resources for the huge investment step by step, Samsung Biologics has little shown the business structure for the funding," Jaecheon Yeo, executive director of the Korea Drug Research Association, told BioWorld Asia. "We need to see how the company will plan to re-invest in its production system as Samsung Biologics is currently in a very tough situation."

Meanwhile, operating profit of Celltrion dropped 32.9% in the first quarter this year from the fiscal quarter. The company's operating income from January to March this year recorded KRW77.4 billion, and sales declined 9.5% year over year to KRW221.7 billion. Net profit fell 28.4% to KRW63 billion. The company attributed the results to a partial shutdown of the first plan last year to expand the production facility.

Celltrion's stock price (068270.KS) fell 3.72% from KRW188,000 to KRW181,000 on May 21, affected by the rapid drop in stock price of Celltrion Healthcare Co., a distributing company of Celltrion. Stock price of Celltrion Healthcare plummeted 9.19% from KRW65,300 to KRW59,300.

JP Morgan Chase & Co., an early investor in Celltrion Healthcare, announced on May 20 that the investment bank's affiliate PEF management firm One Equity Partners LLC would sell 6.5 million shares (a 4.5% stake) of Celltrion Healthcare for KRW390.6 billion.

One Equity Partners is the second biggest shareholder of Celltrion Healthcare. The PEF management firm raised KRW400 billion by selling a 3% stake, or 4.4 million shares, last year. Despite selling stakes, One Equity Partners will maintain the second largest shareholder of Celltrion Healthcare with more than a 10% stake.

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