Including Initial Operating Expenses, 700 Billion Won
At Least 700 Billion Won Additional Investment for Expansion
Celltrion has decided to invest over 1.4 trillion won in acquiring and expanding Eli Lilly's pharmaceutical plant in New Jersey, United States, a facility owned by the global pharmaceutical giant.
Seo Jungjin, chairman of Celltrion Group, is answering questions from reporters during an online briefing on the 23rd. Celltrion
On the 23rd, Celltrion announced that it had signed a contract to acquire Eli Lilly's biopharmaceutical plant located in Branchburg, New Jersey, for approximately 460 billion won. Including the acquisition price and initial operating expenses, Celltrion plans to invest a total of around 700 billion won. The company also intends to expand production facilities on the unused land within the acquired plant, planning an additional investment of at least 700 billion won. In total, at least 1.4 trillion won will be invested solely in the acquisition and expansion of the plant.
Seo Jungjin: "Celltrion is Now Completely Free from US Tariffs"
Seo Jungjin, chairman of Celltrion Group, stated during an online briefing on this day, "We determined that the only way to avoid tariffs in our key market, the United States, was to manufacture locally."
He continued, "With local investment, tariffs will no longer be an issue, and now Celltrion is completely free from concerns over tariffs."
He added, "We have reached a fundamental agreement that about half of the plant's facilities will be used for contract manufacturing (CMO) of existing Lilly products. The remaining half will be used to produce Celltrion's products."
Regarding when the financial impact of this acquisition will be reflected, Chairman Seo answered, "It will be consolidated into our financial statements from the next fiscal year." On the scale of operating profit, he said, "We expect to achieve operating profit levels comparable to other CMO companies," and added, "We completed preliminary negotiations on CMO pricing and related terms before signing this main contract."
Seo also commented on the short-term impact of this acquisition, saying, "Since half of the facilities will generate CMO revenue, it will not be a factor that lowers the operating margin." He also projected that there will be no significant change to the previously announced annual revenue guidance of around 4.6 trillion won.
The plant to be acquired is a large-scale campus consisting of four buildings: production facilities, a logistics warehouse, a technical support building, and an operations building, all on a site of approximately 148,760 square meters (about 45,000 pyeong). With about 36,363 square meters (about 11,000 pyeong) of unused land available for capacity expansion, Celltrion is expected to proactively respond to future increases in market demand through further expansion.
With this acquisition, Celltrion has completed its comprehensive tariff mitigation plan. In addition to mid- to short-term strategies such as preemptively moving two years' worth of inventory to the US and expanding contracts with local contract manufacturers, the company has now secured a fundamental solution by establishing a local production plant. As a result, Celltrion is expected to be free from all potential future tariff risks. Once facility modifications and expansions are completed, not only Celltrion’s main products supplied in the US but also future products will be able to avoid the impact of tariffs from the outset.
Choosing Efficiency Over the High Time and Cost of New Construction
The plant is already operating as a cGMP biopharmaceutical drug substance (DS) production facility and can be operated immediately upon acquisition. This will allow Celltrion to significantly accelerate the production timeline for its own products and reduce costs, compared to building a new plant, which would require at least five years and trillions of won in investment.
Celltrion plans to begin expanding the production facilities within the acquired plant as quickly as possible. Once the expansion is complete, the production capacity is expected to reach 1.5 times that of Celltrion’s Plant 2 in Songdo, Incheon.
The contract also includes the full retention of local employees with operational experience and expertise, ensuring stable plant operation and productivity without any workforce gaps.
In the case of new plant construction, astronomical costs and several years are required just to prepare for initial operations and secure and train personnel. However, by acquiring an already operational cGMP plant along with its skilled workforce, Celltrion can significantly reduce this burden. During the expansion phase, the company also plans to actively utilize New Jersey's extensive pharmaceutical and biotechnology talent pool.
CMO Contract for Existing Drug Substances with Lilly...Securing Additional Local Growth Engines
The company also signed a CMO contract with Lilly, securing a powerful growth engine alongside establishing a local production base in the US. Under this agreement, Celltrion will continue to supply drug substances produced at the plant to Lilly, which is expected to drive revenue growth and enable early recovery of the investment.
By securing a local production base, Celltrion can now establish a one-stop supply chain that covers the entire pharmaceutical production cycle, from manufacturing to sales, within the market. Local production will also significantly reduce logistics costs to the US and production costs compared to outsourcing to other CMO companies, greatly enhancing the competitiveness of Celltrion's products in the US market.
Celltrion and Lilly have agreed to maintain a cooperative system until the acquired plant is fully equipped with a new operational framework to ensure a smooth transition of operations.
Edgardo Hernandez, Senior Vice President and President of Manufacturing at Lilly, stated, "For the past 17 years, the Branchburg plant has been one of Lilly's key production sites, safely manufacturing high-quality pharmaceuticals and demonstrating the expertise, responsibility, and dedication of the local team. I am deeply grateful for the years of dedication shown by the employees at Branchburg and for their contributions to Lilly's mission."
A Celltrion official commented, "With this acquisition, we have completely resolved the US tariff risk and secured a unified local supply chain from production to sales for our main products. We plan to quickly complete post-acquisition processes such as plant optimization and transition. Furthermore, we will continue to expand our production capacity through ongoing investment and do our utmost to solidify our global competitive edge as a leading company in the industry."
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