Celltrion Healthcare
The author is an analyst for NH Investment & Securities. He can be reached at pk.park@nhqv.com -- Ed.
Truxima’s US market share reached its highest level in 1Q23, but the drug’s quarterly price drop was also the largest in the past three years. We expect earnings growth to centere on Remsima SC in 2H23.
Truxima sees largest ASP drop in North America in 1Q23
We maintain a Buy rating on Celltrion Healthcare, but lower our TP by 6% to W85,000, as we cut our 2023 sales forecast for Truxima in North America from W215.4bn to W143.4bn.
We forecast the firm’s 2Q23 sales at W506.6bn (-2% y-y) and OP at W51.6bn (-30% y-y), missing consensus. Truxima's US market share reached a record high of 30.6% in 2Q23, but the 17% quarterly price drop for US Centers for Medicare & Medicaid Services (CMS) was the largest in three years. European sales of Remsima SC, Celltrion Healthcare’s flagship product, likely grew q-q to W83bn in 2Q23, with full-fledged growth expected in 2H23.
Excluding diagnostic kits, COGS-to-sales ratio is estimated at 68% in 1Q23 and 70% in 2Q23. SG&A expenses are forecast at W102.9bn (+54% y-y; SG&A expenses-to-sales ratio of 20%) for 2Q23, similar to 1Q23 when direct sales in the US began in earnest.
1H23 was difficult, but US Yuflyma-related decline was excessive
News of the delay in Humira biosimilar Yuflyma’s listing on the formularies of pharmacy benefit managers (PBMs) in the US and falling drug prices led to a sharp drop in Celltrion Healthcare's share price, but the share price then rebounded on news of a merger. We estimate Yuflyma’s US sales in 2028 at W418bn, which is less than 10% of the company's total sales. Even if the drug price is discounted by 80%, our sales target is achievable as long as a market share of 10% is reached. Of note, the share price drop was greater than the value of Yuflyma in North America, as the market interpreted the Yuflyma PBM listing in North America as being integral to the merger.