Celltrion ex-Chairman Seo set to return to management; group stocks rally

South Korea’s biosimilar giant Celltrion Group’s founder and Honorary Chairman Seo Jung-jin is readying to return to management just two years after his departure to spearhead the company’s merger of its three key units and its global expansion at a time of growing uncertainty over the global economy.

According to Celltrion Group on Friday, its holding company Celltrion Holdings Co. and three listed affiliates Celltrion Inc., Celltrion Healthcare Co. and Celltrion Pharm Inc. recommended the appointment of Honorary Chairman Seo as an inside board director and co-chairman of the board of directors for each company with a two-year term.

His return needs a final nod during each company’s board meeting and the general shareholders’ meeting on March 28.

Investors cheered Seo’s comeback to management, sending the listed Celltrion trio’s shares high on Friday.

Celltrion ended up 4.8% at 150,600 won ($115.58) on Friday after hitting an intraday high of 154,600 won. Its drug manufacturing arm Celltrion Pharm and marketing unit Celltrion Healthcare surged 15.6% to 65,300 won and 7.1% to 57,700 won, respectively, after zooming as much as 25% and 13% earlier.

MERGER EXPEDITION

Investors bet big that Seo’s return to management would expedite a procrastinated merger of its three core affiliates Celltrion, Celltrion Pharm and Celltrion Healthcare under the holding company Celltrion Holdings.

Celltrion in September 2020 announced a plan to unite the three publicly listed companies but the plan has been indefinitely held off due to the company’s lingering window dressing issue that was first raised in 2018 and once placed the company on the brink of delisting.

But the Korean financial authorities in March last year freed the company from the accusation of cooking the books, paving the way for the resumption of the merger process.  

Honorary Chairman Seo reaffirmed the merger during a general shareholders’ meeting in March last year, saying that he would go ahead with the merger after hearing shareholders’ opinions.

The Celltrion trio’s marriage would create a Korean pharmaceutical behemoth with a market capitalization of 34 trillion won, which is large enough to join the Kospi top-10 heavyweight club.

The key to the merger, however, is the performance of each company.

STRONG SALES IN 2022  

Celltrion Healthcare on Friday announced in a regulatory filing that its consolidated operating profit for the fourth quarter ending December 2022 was nearly halved to 37.3 billion won from the same period a year earlier. Sales also decreased 10.7% to 541.1 billion won over the same period, and the bottom line swung to a loss of 73.2 billion won.

But for the whole of 2022, its operating profit stood at 228.9 billion won, up 14.8% on-year on sales of 1.97 trillion won, up 9.3%.

The annual sales were its record high thanks to the brisk sales of Remsima SC, an infliximab biosimilar referencing Remicade to treat autoimmune diseases, in Europe. Remsima SC's sales topped 200 billion won last year, hitting a record high just three years after its launch.

Sales of Yuflyma (CT-P17), a high concentration, low-volume and citrate-free adalimumab biosimilar referencing Humira, have also taken off in Europe, the company said.

Celltrion also announced in a separate filing on Friday that its operating profit came at 647.2 billion won for 2022 on sales of 2.28 trillion won. Profit was down 13% from the previous year but sales were up 20.1%.

CRITICAL TIME FOR CELLTRION’S GLOBAL EXPANSION

The honorary chairman’s return to Celltrion has been strongly requested by the current group management looking to weather rough seas and restructure future strategy amid lingering economic uncertainties worldwide from the prolonged Russia-Ukraine war; the ongoing trade and diplomatic rows between the world’s two biggest economies the US and China; and growing protectionism on the global trade front.  

Seo promised to come back when he left the board in March 2021 if the company should need his help in the face of rapid changes in business circumstances.

As Celltrion is set to launch its key products in other overseas markets this year, the group sees 2023 as a critical time for its global expansion.

Seo is expected to play a key role in building sustainable growth engines in the US, the world’s biggest pharmaceutical market, with his speedy decision-making for the launch of mainstay products in the region and reorganizing the local distribution network.

Celltrion is readying to seek approval for the US launch of Vegzelma (CT-P16), an Avastin or bevacizumab biosimilar, and Yuflyma after their launch in Europe. Its marketing arm Celltrion Healthcare is set to open its direct marketing operations in the US.

It is also looking to get marketing permission for Remsima SC in the US later this year after successfully launching it in Europe.

The company also needs to add new products to its pipeline after the global launch of a few blockbuster biosimilars.

Write to Jae-Young Han at jyhan@hankyung.com

Sookyung Seo edited this article.