SEOUL - Optimism is building for South Korea's biopharmaceutical firm Celltrion and its biosimilar program, as seen in the recent surge of its stock price.

Hyundai Securities analyst Kim Hyerim said Celltrion's accumulated production technologies and financial prowess could make Celltrion's entry into the biosimilar market much easier, further pushing up its share prices.

Fueled by breezy optimism toward its stocks amid overall positive prospects for the recovery of the Korean economy, Celltrion shares rose to a 52-week high of KRW 33,000 ($28.49) on Korea's second-tier KOSDAQ biotech and IT stock market Nov. 19 . The rise marked a sharp increase compared to the low of 13,100 ($11.22) on Nov. 30 last year. Celltrion closed at KRW 32,350 ($27.92) on Nov. 30.

"We believe Celltrion has a working recipe for biosimilar development in light of its financial prowess and production technology based on the [contract manufacturing operation] business, and cost competitiveness secured via mass production," Kim told PharmAsia News.

The analyst noted that Celltrion's position as one of the first movers in the biosimilar market adds upward momentum to the company's stock prices.

Celltrion's CMO Experience Big Boost

Celltrion's experience as a contract manufacturing organization "makes it possible to learn biologics production technologies such as clinical protocols and validation batches," when coupled with its experience in the production of approved drugs for other drug makers, Kim said.

As it turns to producing its own biosimilars, Celltrion may also benefit from being relatively new to the biologics CMO business. Celltrion only produces Bristol-Myers Squibb's Orencia (abatacept), which means it is not under contract for multiple biologics that it would like to produce as biosimilars.

For instance, CMO player Lonza, although armed with production technologies and large-scale production facilities, is forbidden by contract to develop biosimilar versions of the drugs it produces for other drug makers.

"Celltrion, however, isn't blocked by any such restrictions on developing biosimilar products," Kim noted.

While Celltrion is focusing on biosimilars, it has also indicated that it will retain attention on its CMO business (Also see "Korea's Celltrion and Sanofi-Aventis In Line With 2008 Strategic Alliance For Monoclonal Antibodies" - Scrip, 19 October, 2010.).

Considering the huge capital needed for clinical trials ahead of the commercialization of biosimilars, early players such as Celltrion with "financial prowess" will be able to develop and commercialize biosimilar products more easily "without difficulty," Kim noted.

Financial jitters were eased when Celltrion said it would sell a 10 percent stake in the company to Singapore's Ion Investments B.V., a wholly-owned subsidiary of Temasek Holdings (Also see "Korea's Celltrion Sells 10 Percent Of Its Shares To Singapore's Temasek To Fund Biosimilar Development" - Scrip, 28 April, 2010.) .

Due to the expiration of patents of 16 biologics between 2012 and 2019, coupled with increasing demand for biologics and price competitiveness over original products, the global biosimilar market is expected to grow sharply in coming years, noted Kim. Moreover, Celltrion's biosimilars of Roche's oncology agent Herceptin (trastuzumab) and Johnson & Johnson's rheumatoid arthritis agent Remicade (infliximab) are in later-stage development compared to other rivals.

"One to three early movers for each biosimilar will likely make profits through earlier entries into the market," she said, and entry barriers to the biosimilar market are high because of the long-term investment.

Worries Over Celltrion's Initial Focus On Emerging Markets

Unlike Kim's optimistic forecast, some analysts in Seoul cautioned that investors should wait further to see how Celltrion tackles potential barriers such as patent issues in the U.S. and Europe.

"In order to conquer the global biosimilar market, Celltrion, certainly, has to raid into advanced countries such as the U.S., Japan and Europe, but we have to look at the fact that the pharma is focusing on the emerging markets including Asia," Chung Bo-Ra, a healthcare analyst at Daishin Securities, told PharmAsia News.

"Celltrion will eventually have to look at the advanced countries for blockbusters over the emerging markets because advanced countries account for 80 percent of the global biosimilar market," he said.

As Chung noted, Celltrion's record high profits in the third quarter were triggered by the brisk sales of its Herceptin and Remicade biosimilars to countries in South America, the Middle East and Asia (Also see "Korea's Celltrion Eyes Eastern Bloc For Biosimilar Expansion" - Scrip, 5 November, 2010.).

- Peter Chang (p.chang@elsevier.com)

Optimism Building For Korea's Celltrion Amid Expectations For Biosimilars

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