US President Signs Executive Order to Launch Biotech Initiative
The authors are analysts of Shinhan Investment Corp. They can be reached at shawn1225@shinhan.com and jhwon@shinhan.com, respectively. – Ed.
Celltrion unlikely to be hit by follow-up measures of the executive order
US President Joe Biden on Sept. 12 signed an executive order for the launch of a national biotechnology and biomanufacturing initiative, which aims to strengthen the country's biomanufacturing capabilities, expand market opportunities for bioproducts, and bolster biotech R&D capabilities. As a follow-up measure of the executive order, the White House on Sept. 14 hosted a biotechnology and biomanufacturing summit to announce the detailed plans of relevant cabinet agencies.
According to the implementation plans, the US government is set to invest at least USD2bn in total with USD40mn to go into expanding the role of biomanufacturing and USD1bn into providing incentives for the establishment of bioindustrial manufacturing infrastructure. Approximately USD178mn will go into advancing research efforts in biotechnology, bioproducts, and biomaterials. The executive order states that investments will be carried out in biopharmaceuticals as well as a wide range of other areas such as biomaterials, bio-based fuels, polymers and resins.
Market concerns had increased over remarks made at the signing of the executive order that domestically-developed drugs will need to be produced in the US, but no relevant details were included in the follow-up measures. Instead, focus was placed on a wide range of areas such as incentives for the establishment of bioindustrial manufacturing infrastructure as well as plans to reinforce biotech R&D capabilities and boost the development of biomaterials.
Since the signing of the executive order on Sept. 12, share prices of Celltrion, Celltrion Healthcare, and Celltrion Pharm have dropped by 5.4%, 4.9%, and 6.5%, respectively. Share price correction was driven mainly by worries that biosimilars could be affected by possible limits placed on overseas production of drugs developed in the US. However, as aforementioned, no relevant details limiting overseas production of bio new drugs or biosimilars were included in the follow-up measures. In our view, Celltrion Group companies are unlikely to take a hit, considering the characteristics of the market for biopharmaceuticals and the primary purpose of allowing biosimilars in the US.