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Celltrion Liquidates Argentina Subsidiary... Why It Withdrew After 6 Years

[비즈한국] It has been confirmed that Celltrion068270 has liquidated its local subsidiary in Argentina. Celltrion's Latin American subsidiaries have been recording losses, making profitability improvement a key task. Some suggest the possibility of Celltrion adjusting its overseas operations. However, Celltrion stated that it merely cleared out a paper company that was not conducting actual business, and there are no changes to its overseas business strategy.

Celltrion Group actively expanded into the Latin American market in the late 2010s. Celltrion Healthcare, which sold Celltrion products, established local subsidiaries in Colombia and Chile in 2018. In 2019, it created subsidiaries in Argentina and Peru. The structure involved Celltrion Healthcare holding 100% of the Colombian subsidiary, which in turn owned 100% of the Chilean, Argentine, and Peruvian entities. Following Celltrion's absorption and merger of Celltrion Healthcare, Celltrion gained control over these South American local subsidiaries.

In the late 2010s, Celltrion Healthcare targeted the Latin American market primarily with 'Truxima.' Truxima is a biosimilar to the blood cancer treatment 'MabThera.' A Celltrion Healthcare official stated in 2019, "Most Latin American countries operate on a principle of free public supply of medicines, so governments, which are the main purchasers of pharmaceuticals, have a high preference for purchasing drugs that can reduce health insurance expenditures," adding, "As Latin American countries' preference for biosimilars—which possess both medical efficacy and safety along with price competitiveness—is growing, we plan to further strengthen marketing activities to ensure the continuous growth of Celltrion Group's biosimilars through the establishment of additional subsidiaries."

However, significant profits have not yet been realized. Celltrion's Colombian subsidiary and its subordinate entities recorded 27.9 billion KRW in revenue and a net loss of 143.67 million KRW last year. In the first quarter of this year, they posted 7.9 billion KRW in revenue with a net loss of 1.2 billion KRW. While revenue is increasing, profitability appears to be worsening. The total revenue for the Latin American region in the first quarter of this year was 27.1 billion KRW, which is only about 3% of Celltrion's 841.9 billion KRW consolidated revenue for the same period.

Amid this situation, it has been confirmed that Celltrion recently liquidated its local Argentine subsidiary, 'Celltrion Healthcare Argentina.' A Celltrion official explained, "The Argentina subsidiary was established as a contingency to be used if needed later; it was a paper company that was not actually operating," adding, "We had intended to liquidate the Argentine entity for some time, but it was delayed due to other pending issues."

Some speculate that Celltrion may adjust its overseas business. In addition to its Latin American subsidiaries, Celltrion’s subsidiaries in Europe and the U.S. are also recording losses. Celltrion's Hungarian entity, 'Celltrion Healthcare Hungary,' and its subordinates recorded a net loss of 165.6 billion KRW in the first quarter of this year. The net loss for Celltrion's U.S. entity, 'Celltrion USA,' in the first quarter of this year was 25.6 billion KRW. The Hungarian entity has numerous local European subsidiaries as its own subsidiaries. It is reported that some of these companies, like the Argentine entity, do not play a significant role.

A Celltrion official added, "The Colombian subsidiary acts as the control tower for the Latin American region. Liquidating the Argentine subsidiary will not result in changes to our Latin American operations." According to Celltrion's explanation, they simply cleaned up a company with no specific function, and the overseas business remains unchanged. Nevertheless, the liquidation of the Argentine subsidiary is seen as reducing the likelihood of a massive expansion into the Argentine market in the future.

Celltrion's establishment of a local subsidiary in Indonesia this year is also noteworthy. Celltrion previously had little connection to Indonesia, aside from its antibody treatment 'Regkirona' receiving emergency use authorization from the Indonesian Food and Drug Authority in 2021. However, it is reported that they are now interested in the Indonesian market. Last year, Celltrion signed a product distribution contract with a local Indonesian pharmaceutical company. Because of this, prospects have emerged that Celltrion may focus more on the Southeast Asian market than the Latin American market in the future.

Not only Celltrion but the domestic business sector as a whole has a high interest in the Southeast Asian market. The judgment is that there is marketability due to the hundreds of millions of people living in Southeast Asia. Indonesia's population exceeds 280 million. Celltrion also has local subsidiaries in the Philippines and Vietnam. The Philippine subsidiary recorded 1 billion KRW in revenue and 200 million KRW in net profit in the first quarter of this year, while the Vietnamese subsidiary posted 51.48 million KRW in revenue and 1.07 million KRW in net profit. Although the amounts are small, the fact that they are in the black is encouraging. Considering the Vietnam subsidiary was established only last year, it is difficult to say the business is on track yet.

Regarding the establishment of the Indonesian subsidiary, the aforementioned Celltrion official explained, "It is part of efforts to increase the influence of Celltrion products in the Southeast Asian market," but added, "The specific business direction has not yet been finalized."