Celltrion chief calls merger crucial to beat bigger rivals

Pooling resources together is the best way to survive in the cutthroat competition against global pharmaceutical companies with gigantic capital, biopharma Celltrion founder and Chairman Seo Jung-jin said on Wednesday of the firm's merger with its sales affiliate Celltrion Healthcare.

“The integration of Celltrion and Celltrion Healthcare will serve as a momentum for the group to take a leap as a leading global health care firm,” Seo said during a press conference held in Yeouido, Seoul. The event was held to share the company’s future strategy after shareholders of the two companies approved of Celltrion's absorbtion of the marketing unit Monday.

Having its subcutaneous injection formulation of its infliximab Remsima -- Zymfentra -- win approval from the US Food and Drug Administration this week shows the company is on track to becoming a global pharmaceutical company, Seo said.

“Zymfentra will be a blockbuster drug rarely seen in recent times. We wanted the merger to happen in a time when the company has a bright future,” Seo said.

The company expects the new autoimmune disease treatment to become a cash cow, estimating 600 billion won ($443.7 million) in annual sales upon its US market debut and 3 trillion won within three years following the launch.

Seo said those numbers are conservative sales forecasts.

“There are 3 million patients in the US with inflammatory bowel disease, which Zymfentra primarily targets. Demand for SC formulation is increasing among young patients and the elderly due to the convenience of administration,” he said. The SC formulation refers to subcutaneous injections that patients can adminster themselves.

In European countries where Zymfentra has already received marketing approval under the brand name Remsima SC, 40 percent of patients administered with intravenous injection versions switched to the SC version two years after it hit the markets.

The company expects Zymfentra would gobble up the US market share in a similar fashion in three years.

“Maximum sales from Zymfentra can reach 7 trillion won, and 5 trillion won would not be difficult,” Seo said.

Through the merger planned to be wrapped up on Dec. 28, the whole business cycle of the biopharmaceutical developer and its sales affiliate will be synchronized from drug development and manufacturing to sales which is expected to enhance cost competitiveness, the company said.

Strengthening cost competitiveness will enable the use of aggressive pricing strategies, which will boost synergy in expanding sales areas and market share.

"We expect synergies in cost competitiveness and uncertainty resolution through the merger, in addition to our company's strengths in in-house development, in-house production, and direct sales in over 110 countries," Seo said.

The chairman said the merger will also contribute to helping Korean biopharmaceutical and health care industries become the backbone of the economy.

“For the country to develop, it is not appropriate for conglomerates to have a large number of affiliates. We need 'selection and concentration' to make Korean companies to become global top-tier players,” he said.

Celltrion also set a goal of increasing sales to 12 trillion won by 2030 by increasing its treatment pipeline. The plan includes further expanding existing products by changing the formulation, usage, and dosage of biosimilars with a focus on autoimmune disease treatments and anticancer drugs, while also accelerating the development of additional products to secure a total of 22 medications by 2030.

Despite the rapid pipeline expansion plan, there will be no shortage of production capacity for in-house production until 2030, Seo said.

"If expansion of plants is necessary in the future, we will notify you in advance. We will also review positively if related conditions for the establishment of the US factory become concrete," he said.

Regarding concerns about whether Celltrion holds sufficient cash to pay shareholders who dissent to the merger and can exercise their appraisal rights, Seo ruled out the possibility that it would hamper the tie-up.

Celltrion's board of directors previously set the limit for the total amount that the company is to pay for those exercising appraisal rights at 1 trillion won. But Seo promised he would push the merger even if the amount exceeded the threshold.

“There is no uncertainty left for the merger. We have enough money to pay even if all of those who voted against the merger exercise the right,” he said.

Shareholders can exercise their appraisal rights to demand Celltrion purchase their shares until Nov. 13.