Three major biotech stocks, a look at their 2021 earnings.

Samsung Biologics, Celltrion, and SK Bioscience are among the major players in the domestic bio industry.

Each year, the company continues to grow its sales with dazzling results.

Samsung Biologics and Celltrion have already joined the so-called '1 trillion won in sales club'. SK Bioscience is also set to settle down soon.

If we look at the background, it is because we have secured both technological advancement and global competitiveness through long-term investment.

The results for 2021 were recently announced.

Here, I would like to summarize how successful the three major bio companies are and what issues they are currently paying attention to.

We will take a look at SK Bioscience, Celltrion, and Samsung Biologics in that order.

1. SK Bioscience SK Bioscience was originally a contract manufacturing (CMO) company specializing in flu vaccines.

We have a lot of competition here. Then, as the pandemic broke out in 2021, in order to respond to the coronavirus vaccine, the company temporarily halted production of the existing flu vaccine and boldly turned to this business.

That decision turned out to be a jackpot.

Thanks to the huge number of orders, we were able to achieve both sales growth and profit improvement. This is the performance trend for the last 4 years.

2018: KRW 99.4 billion in sales, KRW 26.4 billion in operating profit
2019: Sales of 183.9 billion won, operating profit of 22.7 billion won
2020: KRW 225.6 billion in sales, KRW 37.7 billion in operating profit
2021: Sales of KRW 929 billion, operating profit of KRW 474.2 billion

It was truly a quantum jump in 2021! SK Bioscience produced vaccines for AstraZeneca in the UK and Novavax in the US in 2021.

Many of them have been released to the market. In particular, the contribution of Novavax was very significant.

It can be said that SK Bioscience's performance this year also depends on the pandemic.

How long it lasts and how you respond seems to have a huge impact on the outcome.

Accordingly, while expanding its existing business, SK Bioscience is conducting a global phase 3 clinical trial of its own vaccine, GBP510, and a domestic booster shot clinical trial.

If commercialized, it plans to supply hundreds of millions of new inoculations.

Not only this. We are preparing a clinical trial for a general-purpose vaccine to respond to corona mutations such as Omicron, and we plan to start clinical trials with a combo vaccine that prevents both corona and flu at the end of 2022.

To facilitate the above work, they are making bold investments, such as expanding the Andong factory and building a new research center in Songdo.

Some observers believe that SK Bioscience will easily exceed KRW 1 trillion in sales this year if it proceeds as planned, given the recent trend in the number of confirmed cases and the state of the corona virus.

Conversely, if the pandemic is resolved or ended, there is a possibility that it will lead to slowing growth or business downsizing.

 

2. Celltrion

Celltrion is a company that makes biosimilars, i.e., drugs that mimic biologics.

Although it is an imitation drug, many people choose Celltrion as Korea's representative bio company because it is developed directly rather than as a CMO.

Its main product lines include Remsima and Uplasma for autoimmune diseases, Truxima for blood cancer, and Herzuma for breast cancer.

It has considerable recognition abroad, mainly in the United States and Europe. And in 2021, we added Lekkorona, a corona treatment, and a diagnostic kit to our portfolio. This is the performance trend for the last 5 years

2017: KRW 670.5 billion in sales, KRW 234.2 billion in operating profit
2018: KRW 982 billion in sales, KRW 338.6 billion in operating profit
2019: KRW 1.128.4 trillion in sales, KRW 378 billion in operating profit
2020: Sales of KRW 1.84 trillion, operating profit of KRW 712.1 billion
2021: Sales of KRW 1.89 trillion, operating profit of KRW 753.9 billion
Looking at sales in 2021

In the midst of a decline in the existing product lines, Rekkona and diagnostic kits made up for it, and as a result, it succeeded in slightly growing. However, I don't think this would be a very satisfactory result.

These days, Celltrion is suffering from various bad news internally. To mention a few issues...

(1) JP Morgan published a report that the current share price was excessive, citing a decline in market share in Europe, the main activity space, and competition among biosimilar companies.

(2) The FSC raised the so-called 'accusation of accounting fraud', arguing that the FSC had excessively exposed the company's performance in a wrong way.

(3) Considering the merger of subsidiaries for the reasons of strengthening business competitiveness, resolving corporate value dispersion, and reducing taxes, but the market reaction was not so good that it was not proceeding properly.

(4) A company-wide response to the corona virus was expressed, but the results were not as good as expected. So the current atmosphere is not very good.

It is being recognized as a growth engine from a long-term perspective as it is developing several product lineups and has already achieved great global achievements.

 

3. Samsung Biologics

 

Samsung Biologics is a bio company with global competitiveness in the CMO field. There are also opinions that it has already ranked first in terms of production volume.

In addition, as the leading company in bio market capitalization, among the three companies, both business stability and completeness of growth strategy are highly evaluated. The following is the performance trend for the last 5 years.

2017: KRW 464.6 billion in sales, KRW 65.9 billion in operating profit
2018: KRW 535.8 billion in sales, KRW 55.6 billion in operating profit
2019: KRW 701.5 billion in sales, KRW 91.7 billion in operating profit
2020: Sales of KRW 1.164.7 trillion, operating profit of KRW 292.7 billion
2021: Sales of KRW 1.568 trillion, operating profit of KRW 537.3 billion

Many people compare the CMO business to a semiconductor foundry.

This is because sales and performance depend on how many orders are received for outsourcing high-tech products.

In 2020, Samsung Biologics signed a total of 17 contracts with GSK, AstraZeneca, Roche, and Eli Lilly.

Half of these were new customers. In 2021, a total of 15 contracts were signed with Roche, AstraZeneca, TG Therapeutics, and Gilead.

Most of these were existing customers. Continuing to sign contracts with existing customers means that reliability and competitiveness have been firmly established in terms of main business.

The company continues to expand its production capacity.

A fourth plant is currently under construction. In addition, we are preparing two major growth engines.

First, we are expanding our business areas beyond CMO to CDO.

If the CMO is to produce pharmaceuticals on consignment to global pharmaceutical companies that want to focus on R&D and marketing, CDO is called consignment development and refers to helping small and medium-sized pharmaceutical companies to work on cell lines and develop formulations (combination of ingredients).

Although the contribution to sales is not yet high, it is expected that the proportion will gradually increase.

Second, we plan to strengthen our biosimilar business.

In the past, Samsung Biologics established Samsung Bioepis, a biosimilar joint venture company with Biogen.

Recently, Biogen took over the entire stake in Samsung Bioepis and made it a subsidiary.

As Samsung Bioepis is already generating trillions of sales from autoimmune disease treatments and anticancer drugs, it is expected to make a significant contribution to earnings.

Since we are developing a variety of additional products, we expect the company to continue its sustainable growth by creating another huge revenue stream.