Celltrion

In response to the growing interest and inquiries from our shareholders regarding the recent progress and our business outlook, we would like to provide updates focusing on the key points as outlined below.

First, we would like to provide an update on the status of Zymfentra prescription.

Since the official U.S. launch of the new drug in the first quarter of 2024, we have been continuously working to expand PBM (Pharmacy Benefit Manager) coverage. As of now, we have successfully listed Zymfentra on the formularies of PBMs that cover approximately 80 percent of the market. Even considering that it is a newly launched drug, we have achieved coverage expansion at a relatively fast pace. However, for this to lead to actual patient prescriptions, insurers under the PBMs need to list Zymfentra. The listing process by insurers has been delayed by approximately 2 to 3 months compared to our original timeline.

Nevertheless, the prescription volume of Zymfentra in the U.S. is currently increasing at a rapid pace, and shipments to wholesalers, which directly contribute to our revenue, are growing even faster.

Also, online and TV advertisements for Zymfentra have been airing since October. Notably, the Youtube advertisement has garnered 1.5 million views in just two weeks, significantly outperforming the typical view counts for pharmaceutical ads. The customer traffic being directed to the Zymfentra website from the ad is rapidly increasing as well. We expect the impact of these advertisements to become more pronounced starting in November. As a result, we anticipate that both prescriptions and sales will accelerate further from this point onward.

Given the overall situation, we anticipate achieving annual sales of 1 trillion KRW for Zymfentra by 2025 without significant challenges. We will provide a detailed explanation of the sales status, including shipments to wholesalers, as well as future outlooks, during the third-quarter earnings announcement.

As previously announced, we are targeting 5 trillion KRW in total sales for 2025. We are currently finalizing detailed plans for each country and product.

Given the expansion of our product portfolio and the growth in market share, we expect to achieve our targeted sales of 5 trillion KRW for 2025 without any difficulty.

Secondly, we would like to provide a brief account of profitability. 

On December 28, 2023, with the merger of Celltrion, Inc., and Celltrion Healthcare, Celltrion acquired high-COGS inventories previously held by pre-merger Celltrion Healthcare. This has led to a temporary increase in Celltrion’s cost of sales this year. 

Nevertheless, the proportion of high-cost inventories is continuously decreasing, as old inventories are being digested rapidly, driven by global prescription volume increases across all products and the production of new drug substances.

Celltrion has been explaining to our investors and shareholders the increase in the COGS ratio is temporary and will recover to the normal level by the end of 2024. The ratio is improving as planned. 

It should be noted that the COGS ratio improvement is done through normal operational activities regardless of yield improvements. Celltrion is continuously reducing costs through yield improvements and production internalization. These efforts will further accelerate the future COGS ratio improvement.

During the first half of 2024, our operating profit margin temporarily declined due to increased amortization expenses related to intangible assets following the merger. However, the amortization of sales rights, which accounted for a significant portion of the expenses (amounting to 113.7 billion KRW), was completed in the first half of 2024.

As a result, starting from the second half of 2024, we expect an improvement in our operating profit margin driven by improved COGS ratio and a significant reduction in amortization expenses for intangible assets.

Third, we would like to provide an update on our progress in entering the CDMO business.

In September, we announced plans to expand our CDMO (Contract Development and Manufacturing Organization) business through public disclosure. The key focus of this plan is to secure a competitive edge over existing CDMO companies, fully leveraging Celltrion's expertise in antibody development and production with our higher productivity and lower expansion costs.

We are currently advancing rapidly with detailed discussions on the business. Our plan is to establish a wholly-owned subsidiary of Celltrion by the end of the year, with full-scale facility expansion and commercial activities set to commence next year.

Celltrion is committed to strengthening CDMO business to enhance our growth momentum, ultimately increasing shareholder value.

We are in the process of finalizing our Q3 2024 financial statements and will provide a more detailed explanation of our Q3 2024 results through public disclosure once completed. 

We sincerely thank our shareholders for their continued interest in and support of Celltrion.