Undervaluation Factors from the Merger Resolved in Q3
Normalization Expected from Q4
Celltrion Group's holding company, Celltrion Holdings, announced on October 28 that it is in the process of carrying out a large-scale purchase of Celltrion shares, which was promised to shareholders in July this year, amounting to approximately 500 billion KRW. The company also revealed plans to expand the scale of the purchase to around 700 billion KRW.
Celltrion Holdings announced its plan for a large-scale purchase of Celltrion shares in July to improve profitability and enhance the corporate value of its subsidiaries. The company is currently in the process of purchasing approximately 400 billion KRW worth of Celltrion shares by the end of this month.
Once the ongoing acquisition of approximately 150 billion KRW worth of shares is completed, Celltrion Holdings plans to immediately proceed with an additional purchase of around 288 billion KRW. Including the shares acquired earlier in May, worth about 120 billion KRW, the total amount of Celltrion shares acquired by Celltrion Holdings this year alone will exceed 800 billion KRW once the additional purchase is completed.
Celltrion Holdings explained that despite Celltrion's solid business fundamentals, the company has been under temporary operating profit pressure due to a rise in short-term cost ratios and amortization of intangible assets following the merger with Celltrion Healthcare (the dissolved entity). In response, the company has continued to purchase shares on the open market to enhance shareholder value and minimize the undervaluation of Celltrion.
The upcoming additional share acquisition by Celltrion Holdings is expected to be the last, as Celltrion has now completely overcome the operating profit pressure resulting from the merger as of the third quarter of this year. However, a representative of Celltrion Holdings added that if Celltrion's shares remain undervalued, the company will consider expanding the share purchase up to 1 trillion KRW to further enhance shareholder value.
These efforts to enhance shareholder value are being carried out across the entire group, including the major shareholders. Previously, Celltrion purchased a total of 850 billion KRW worth of treasury shares in about nine rounds this year, and the volume of share cancellations has reached approximately 900 billion KRW this year alone.
In particular, Seo Jungjin, Chairman of Celltrion Group, purchased approximately 50 billion KRW worth of Celltrion shares in July, and the affiliate Celltrion Skincure also acquired around 50 billion KRW worth of shares. Celltrion employees participated as well, purchasing about 40 billion KRW worth of shares through the employee stock ownership association, leading to a company-wide share purchase initiative. Once Celltrion Holdings completes its additional share acquisition, the total amount of Celltrion shares purchased across the group this year will reach approximately 1.8 trillion KRW.
While it is not uncommon for companies to acquire treasury shares as part of shareholder return or value-up programs, it is extremely rare for the holding company, affiliates, and employees, including top management, to participate in large-scale share purchases. This serves as a model example of a shareholder-friendly policy that prioritizes shareholder value and reflects the confidence of the company's members in its growth.
Alongside these proactive shareholder return activities, Celltrion is also achieving rapid growth. According to a provisional disclosure this month, Celltrion recorded consolidated sales of 1.026 trillion KRW and operating profit of 301 billion KRW in the third quarter. Compared to the same period last year, sales increased by 16.3% and operating profit by 44.9%, marking the highest-ever third-quarter sales and the largest quarterly operating profit in the company's history.
Notably, the cost of goods sold ratio dropped to 39%, down 9 percentage points from the same period last year, successfully entering the 30% range and confirming the improvement effect from the merger with Celltrion Healthcare. The company is building a solid foundation by increasing sales through stable prescriptions of major products and successful market entry of new products, as well as maximizing profit margins through improved cost ratios following the merger.
Celltrion is also making steady progress in securing a global production base in the United States, the world's largest pharmaceutical market. The company plans to complete the acquisition of Eli Lilly's biopharmaceutical production facility in Branchburg, New Jersey, by the end of this year and immediately pursue expansion after the acquisition.
A Celltrion Group representative stated, "Celltrion continues to break sales records and secure production facilities in the United States, accelerating its leap into a global big pharma company. The group will continue to actively pursue shareholder returns, share the fruits of growth with investors, and strive for mutual growth."
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