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Celltrion continued to improve its profitability in the third quarter of this year, with operating profit growing faster than revenue. Driven by expanded sales of high-margin follow-on products and cost improvements, its operating margin rose to 34%. However, as price competition intensifies in the global biosimilar market, the company’s ability to sustain its higher margin through increased sales of new products and cost savings has emerged as a key factor in future earnings growth.

According to the Financial Supervisory Service on the 12th, Celltrion posted preliminary consolidated revenue of 1.5 trillion won and operating profit of 510 billion won in the third quarter of this year. The figures represented year-on-year increases of 45.8% and 69.2%, respectively, with both revenue and operating profit setting new quarterly records.

What stands out is the difference in the pace of growth between revenue and operating profit. Compared with the third quarter of last year, revenue increased by approximately 470 billion won, while operating profit rose by around 210 billion won. The increase in operating profit amounted to approximately 44% of the increase in revenue, demonstrating how revenue growth is translating into higher profits. The operating margin reached 34% in the third quarter, up 4.7 percentage points from the same period last year.

Behind this shift is the expansion of a product portfolio centered on high-margin follow-on products. While Celltrion’s existing flagship biosimilars maintain a stable sales base, the share of relatively more profitable follow-on products, including Remsima SC, Steqeyma, Yuflyma and Omlyclo, continues to grow. The company said that production efficiencies and improvements to its cost structure, combined with this shift in its product mix, had driven operating profit growth that outpaced revenue growth.

The increasing utilization of its existing global direct-sales network is also noteworthy. Celltrion is leveraging the local sales organizations and distribution networks it established to sell existing products in the U.S. and Europe to support the launch and sales of new products. As the number of products it sells increases, the company can make greater use of its existing sales network and expects to benefit from economies of scale over the medium to long term.

Building on this sales base, Celltrion is expanding the market share of both new and existing products in the U.S. and Europe. In the U.S., Steqeyma and Yuflyma had market shares of 15% and 11%, respectively, as of August this year. In Europe, Omlyclo had secured a market share of more than 90% in Spain as of July. The growth of new products is adding to the established sales base of existing products.

In the fourth quarter, attention is focused on how much expanded sales of new products will contribute to earnings. Omlyclo, which launched in the U.S. early this month, was listed as a preferred drug on the commercial insurance formulary of Optum, a major pharmacy benefit manager (PBM). Celltrion plans to use the listing to expand prescriptions in the U.S. In Europe, major-country tenders and product supplies are concentrated in the second half of the year, and the company expects follow-on products to make a greater contribution to sales.

The key challenge going forward is how consistently Celltrion can maintain its improved profitability. Intensifying competition in the biosimilar market continues to put downward pressure on prices, making it difficult to ensure earnings growth through increased sales volume alone. A key variable will be the extent to which expanded sales of follow-on products and cost improvements can offset the pressure from price competition.

A Celltrion official said, “We have demonstrated the effectiveness of our growth strategy through our results, with quarterly operating profit surpassing 500 billion won for the first time and our quarterly profit targets, set at the beginning of the year, exceeded for three consecutive quarters.”

The official added, “We will continue to increase the share of high-margin follow-on products and improve our cost structure to enhance the quality of earnings growth, while working to achieve our annual business plan.”

                                                                                                             Bae Da-hyun