Celltrion

Dear Valued Shareholders,

On May 12, 2025 (local time), US President Donald J. Trump signed an executive order mandating that prescription drug prices in the United States be aligned with those of other countries. 

In light of the heightened interest and inquiries from our shareholders, we would like to share our analysis and response strategy below.

1. Key Points of the U.S. Executive Order and Changes in the Market Landscape
• The executive order aims to reduce the prices Americans pay for prescription drugs to levels comparable with those in other countries.
• To achieve this, ▲ the Secretary of Health and Human Services (HHS) is tasked with implementing a program that allows U.S. patients to directly purchase medications from pharmaceutical companies at the Most-Favored-Nation (MFN) price, and ▲ the Secretary is also required to communicate target MFN prices for U.S. patients to pharmaceutical companies within 30 days.
• The core focus of the announcement is ultimately on ▲ reforming middlemen structures (e.g., PBMs) and ▲ reducing prices for high-cost drugs. This is expected to present positive opportunities for our U.S. operations.

The significance of the executive order and its impact on Celltrion are as follows:
 

2. Impact on Celltrion and Business Opportunities
• For Celltrion, whose business structure is centered on biosimilars, the executive order is expected to create a more favorable business environment in the following ways.

2-1. Opportunities from the Streamlining of Intermediary Distribution Structures

• One of the key pillars of the announced executive order is the reform of intermediary distribution structures (e.g., PBMs), which is anticipated to present positive opportunities for our U.S. operations.
• The distribution dominance established by high-margin pharmaceutical companies relying on branded products is expected to weaken. This could create opportunities for biosimilar companies operating in a competitive landscape to expand their market presence.
• In particular, biosimilar manufacturers will have the opportunity to negotiate drug prices directly with the government, rather than through middlemen such as PBMs, which is expected to create benefits for both the government and manufacturers.

2-2. Opportunities for Accelerating Biosimilar Adoption with the Reduction in High-Cost Drug Prices
• One of the key aspects of the executive order is the reduction of high-cost drug prices, which is expected to have a positive impact on our U.S. operations.
• Currently, under the U.S. insurance and PBM system, high-cost branded drugs are first prioritized on formularies, followed by limited competition among biosimilar products, with only 2-3 additional products being listed.
• Due to the issue surrounding rebates to middlemen, biosimilar prices are set at levels similar to those of originator drugs in hospital prescriptions, which prevents tangible benefits for patients. This has significantly limited the market expansion of biosimilars in the U.S. compared to Europe.
• As a result, the biosimilar prices we currently supply in the U.S. are not as competitive as those in Europe.
• However, with the implementation of the executive order and improvements in the intermediary distribution structure, the actual prescription prices of biosimilars will be reduced, and the benefits to both the government and patients will be clear. This will accelerate the expansion of biosimilar prescriptions to levels similar to those in Europe.

2-3. Opportunities from Parallel Imports and Portfolio Expansion
• If parallel imports are activated as part of the executive order to supply pharmaceuticals at Most-Favored-Nation (MFN) prices, Celltrion will have the opportunity to introduce products that were previously not launched in the U.S.
• With our direct sales network in the U.S. and extensive experience in the European market, we can expect to accelerate sales by expanding our product portfolio and leveraging marketing synergies.

After thoroughly reviewing the executive order, we believe that it will work in favor of biosimilar manufacturers, and specifically, for companies like Celltrion, which directly sells biosimilars in the U.S., it presents another significant opportunity.

We will continue to monitor the specific implementation procedures and policy direction from the U.S. government, adapting our strategies flexibly and proactively in response to any changes in the situation.

Through this approach, we are committed to rewarding the ongoing trust and support of our shareholders by responding swiftly to global healthcare policy changes, particularly in the U.S., and achieving tangible results.

Thank you once again for your unwavering confidence in us.