Samsung Biologics' Plant 4. [Samsung Biologics]
Samsung Biologics' Plant 4. [Samsung Biologics]

Samsung Biologics posted record second-quarter earnings Thursday, with consolidated sales of 1.32 trillion won ($892 million) and operating profit of 586.4 billion won — the highest figures ever recorded for a second quarter. The results reflect large-scale CMO orders secured from global pharmaceutical companies in prior years now flowing through to revenue.

However, production disruptions caused by a union strike are expected to weigh on second-half results, making the ramp-up of the company's Rockville, Maryland facility and the certification-batch production phase at Plant 5 critical variables in defending its full-year guidance.

Second-quarter sales rose 30.2 percent year on year to 1.32 trillion won, while operating profit climbed 22.9 percent to 586.4 billion won, the company said Thursday. First-half cumulative sales reached 2.58 trillion won and cumulative operating profit hit 1.17 trillion won, surging 28 percent and 29 percent, respectively, from the same period last year.

The primary driver of the strong performance is the large order backlog the company has built up consistently over the years. Samsung Biologics' cumulative confirmed CMO order value stands at $21.7 billion, and its product approval count has reached 460 in total — including 60 from the US Food and Drug Administration and 55 from the European Medicines Agency.

With Plants 1 through 4 running at full capacity, commercial production volumes from the already-secured pipeline translated directly into revenue growth. Despite upfront costs related to preparations for Plant 5 and the Rockville facility, a favorable exchange-rate environment driven by a stronger dollar helped the company maintain an operating profit margin of 44.4 percent.

The second half, however, faces headwinds. Losses from batch production disruptions caused by the recent union strike are set to be recognized on the books from the third quarter. Given the nature of biopharmaceutical contract manufacturing, any interruption or delay in the production process makes costs from discarding and restarting affected batches unavoidable.

The company said it is rescheduling production to minimize the impact of the disruptions. Its plan is to reproduce within the year the batches disrupted in the second quarter and recognize them as revenue, limiting the effect on full-year earnings and reducing delivery delays for customers. The company also expects the continued strength of the dollar to offset a portion of the strike-related losses.

Despite the strike fallout, Samsung Biologics maintained its full-year sales growth guidance of 15 to 20 percent over last year, keeping its target at the upper end of that range. The company said strong tailwinds are in place to support second-half performance.

Revenue from the Rockville production facility — where the acquisition has been completed and commercial production is now under way — will begin to be fully recognized from the third quarter. The plant has completed quality testing on second-quarter production batches and is expected to become a meaningful revenue contributor that helps offset strike-related shortfalls. Plant 5, which began operations last year, has also successfully completed trial production batches and entered the certification-batch production stage, and is set to make a greater contribution to second-half sales.

Samsung Biologics is also pressing ahead with its global expansion on other fronts — entering the peptide contract development and manufacturing organization market through the acquisition of Swiss firm PolyPeptide Group, and opening a sales office in Amsterdam in the third quarter. "We will continue to strengthen our order competitiveness and sustain an overwhelming competitive edge by expanding our three core pillars: production capacity, portfolio and global presence," a company official said.


silverpaper@heraldcorp.com