Potential Developer of COVID-19 Treatment
The author is an analyst of KB Securities. She can be reached at kahye.hong@kbfg.com. -- Ed.
Initiate coverage with BUY and target price of KRW340,000
We initiate coverage of Celltrion with a BUY rating and TP of KRW340,000. Our DCF-derived TP (50.5x 2021 P/E) reflects 6.04% WACC (6.04% cost of equity; 1.19% cost of debt; 0.91 52w adj. beta) and 3.0% TGR.
Better production efficiency and new product launches behind 2020-22 CAGR OP of 46.3%
We forecast 2020-22 CAGR revenue/OP at 36.1%/46.3% and an increase in OPM (40% in 2020→42% in 2022): (1) OP should receive a boost (+6.6pp YoY in 2020) from capacity ramp-up and improved Remsima production efficiency. (2) Growth engines have been secured with more than one product launch every year. There is also potential for the U.S. rollout of Remsima SC in 2022 (launched in Europe in 2020), the European launch of CT-P17 (a Humira biosimilar) in 2021 and the release of CT-P16 (Avastin biosimilar) in 2022. (3) More balanced growth has been achieved across businesses via the acquisition of business rights for brands of Takeda Pharmaceutical in the Asia-Pacific region.
Potential developer of COVID-19 treatment
With its wide product range of chemical drugs and biologics, Celltrion is poised to become a comprehensive pharmaceutical company. We are positive about its: (1) Acquisition of business rights for Takeda brands in the Asia-Pacific region (2) Accelerated push for existing biosimilar business.
Also, we have high expectations for new drug development amid COVID-19. With the pandemic continuing to spread, global pharmaceutical companies are striving to launch neutralizing antibody drugs, with Celltrion accelerating its push for a treatment. The results of Celltrion’s CT-P59, which is currently in phase 2, 3 clinical trials, are expected to be released within the year. The drug has the potential to hit the market in 2021 via emergency approval. This should provide an additional boost to earnings.