Celltrion (068270 KS): Issues to consider
Background
The Celltrion group, Celltrion Inc and Healthcare, manufacture and market respectively biosimilar drugs. These are effectively non-branded replacement drugs for biologics whose patents are expiring. Biologics have generated billions of dollars of patented profits for their originators. But, given the cost of biologics, governments around the world are encouraging the suppliers of cheaper biosimilars. Celltrion has been particularly successful in taking market share in Europe. Its main drug, Remsima, has taken a 50% share since launch, three years ago, partly by supplying its drug up to 75% cheaper than the biologic' pre-patent expiry price.
The stock came to our attention following our reports on Pharmaceutical industry trends and our report on creative accounting. We have sent our clients a report on the stock that investigates several issues and provides a valuation. Unfortunately, the report is only for our clients who are regulated professional investors.
Issues to consider
Without making any recommendation about the company’s securities, we suggest that anyone interested in Celltrion might want to ask the following questions:
Please contact us, if you would like to become a client and get a full copy of the report.
The Celltrion group, Celltrion Inc and Healthcare, manufacture and market respectively biosimilar drugs. These are effectively non-branded replacement drugs for biologics whose patents are expiring. Biologics have generated billions of dollars of patented profits for their originators. But, given the cost of biologics, governments around the world are encouraging the suppliers of cheaper biosimilars. Celltrion has been particularly successful in taking market share in Europe. Its main drug, Remsima, has taken a 50% share since launch, three years ago, partly by supplying its drug up to 75% cheaper than the biologic' pre-patent expiry price.
The stock came to our attention following our reports on Pharmaceutical industry trends and our report on creative accounting. We have sent our clients a report on the stock that investigates several issues and provides a valuation. Unfortunately, the report is only for our clients who are regulated professional investors.
Issues to consider
Without making any recommendation about the company’s securities, we suggest that anyone interested in Celltrion might want to ask the following questions:
- Why does Healthcare book over 50% of annual sales in the fourth quarter?
- In Healthcare's IPO documents, the company talked about 25%+ margins, yet they have collapsed in the fourth quarter, what happened?
- Why are the revenue numbers for 2016 different in the annual report and the IPO documents?
- Why is revenue falling in Asia and North America?
- Healthcare bought inventory from Inc when drug prices were much higher, yet they have yet to make any inventory price adjustment, why?
- The current valuation would appear to be predicated on revenues rising 10x in three years, is this possible?
- They would appear to have taken a 50% market share in Europe by offering an alternative to Remicade at a 70%+ discount, has this changed overall demand?
- Why are receivable days so long?
- Post IPO, Healthcare has plenty of cash. Why is it still not paying Inc for its purchases?
- Sales are booked on delivery, but it appears that they offer rebates etc when the drugs are used. Is this why revenue is retroactively adjusted?
- What are their expectations for market share in three years?
Please contact us, if you would like to become a client and get a full copy of the report.
Important
This note is written with the sole purpose of highlighting some issues we think are important.
It is not a recommendation to BUY or SELL any of the securities mentioned and should not be taken as such.
Readers should form their own opinions about the company and seek appropriate advice.
Please read the Bucephalus disclaimer.
This note is written with the sole purpose of highlighting some issues we think are important.
It is not a recommendation to BUY or SELL any of the securities mentioned and should not be taken as such.
Readers should form their own opinions about the company and seek appropriate advice.
Please read the Bucephalus disclaimer.