[Click eStock] Samsung Biologics Expected to Continue Additional Expansion

On December 23, IBK Investment & Securities maintained its "Buy" investment rating and target price of 2.09 million won for Samsung Biologics, stating that the trend of expanding production capacity in the United States is expected to continue over the medium to long term.

The previous day, Samsung Biologics announced that it had signed an agreement with GlaxoSmithKline (GSK) to acquire the biopharmaceutical manufacturing facility of Human Genome Sciences (HGS) in Rockville, Maryland, USA. The acquisition amount is $280 million (approximately 414.7 billion won).

Jung Eesoo, a researcher at IBK Investment & Securities, explained, "Through this acquisition, Samsung Biologics will secure a total drug substance (DS) production capacity of 60,000 liters in the United States. The biopharmaceuticals for GSK that were previously produced at HGS will continue to be supplied to the US market by Samsung Biologics after the acquisition. As a result, the company has stably secured additional US-bound volume for its existing client, GSK."

The acquisition is expected to be completed within the first quarter of next year and to be reflected in consolidated earnings from the second quarter. Jung added, "While the impact on earnings from the acquisition will become clearer after the annual results announcement this year, considering the total capacity of 60,000 liters, we estimate it will contribute more than 10% to Samsung Biologics' revenue."

Further expansion is expected to continue. Jung commented, "With this acquisition, Samsung Biologics has established production bases in both Korea and the United States, further strengthening the stability of its global biopharmaceutical supply. Moreover, the company is considering additional capacity expansion and new investments in the United States, so the trend of expanding US capacity is likely to persist over the medium to long term." He continued, "Although production costs in the US will inevitably rise, we expect the increase in order opportunities and revenue growth rate, due to the favorable business environment in the US, will more than offset these costs. Consequently, these structural changes will enhance the growth premium for Samsung Biologics."

Momentum is also anticipated from the enactment of the US Biosecurity Law. With President Donald Trump signing the National Defense Authorization Act (NDAA), which includes the Biosecurity Law, Chinese contract development and manufacturing (CDMO) companies are now more likely to be excluded from the supply chains of global pharmaceutical companies. Jung stated, "Amid these changes, Samsung Biologics, with its low geopolitical risk and dual production facilities, is emerging as an alternative supplier. This aligns with the supply chain diversification strategies of global pharmaceutical companies and is expected to drive momentum for large-scale CDMO order expansion."