Remsima SC Sales to Grow Visibly in 2021
The author is an analyst of Shinhan Investment Corp. He can be reached at shawn1225@shinhan.com. -- Ed.
3Q preview: Sales to remain solid, OP to fall short on R&D spend
Celltrion is expected to have posted consolidated sales of KRW459.6bn (+59.0% YoY) and operating profit of KRW172.4bn (+67.2% YoY, operating margin of 37.5%) for 3Q20. While sales were likely in line with the market consensus (KRW458.3bn), we believe operating profit missed the consensus (KRW190.7bn) due to: 1) reflection of R&D spend on COVID-19 treatment; and 2) rise in the sales share of Remsima IV which carry a high COGS ratio.
Celltrion disclosed in 3Q that it signed four contracts with Celltrion Healthcare to supply biosimilar products worth KRW370.5bn in total. According to the disclosed data, the sales share of Remsima IV should have been higher at 36% in 3Q vs. 19% in 1Q and 20% in 2Q. The product has seen continued increase in production efficiency as confirmed in 2Q results, but improvement in gross margin was likely limited due to a high COGS ratio vs. higher-margin Truxima and Remsima SC. We believe the company booked about KRW20bn in phase I clinical trial costs for COVID-19 antibody treatment in the quarter. Excluding the costs, operating profit should come in line with the market consensus at KRW192.4bn.
Remsima SC sales to grow visibly in 2021
As described in our October 15 preview report on Celltrion Healthcare, Remsima SC sales are forecast to grow in earnest from 2021. With the final approval for additional indications acquired from the European Medicines Agency in July, Remsima SC (infliximab biosimilar) now matches all approved indications for the intravenous formulation in adult patients. The company has been attracting new patients with added indications in existing markets since end-3Q20 and should launch the product in all EU5 countries (Germany, UK, France, Spain, Italy) as early as within the remainder of 2020. We recommend focusing on the trend of sales volume in Europe, which is highly likely to rise visibly next year and boost growth in overall revenue from Remsima SC.
Retain BUY for a target price of KRW360,000
Celltrion shares are taking a pause after a rally on robust earnings in 1H20. However, we expect a further rise in the shares, considering: 1) 3Q20 earnings likely to remain solid when excluding the R&D spend on COVID-19 treatment; 2) forecasts for growth in sales of high-margin Remsima SC in 2021; and 3) strong biosimilar R&D capabilities and remaining pipeline.