Celltrion Inc. confirmed Tuesday it has agreed to acquire Eli Lilly and Company’s plant in Branchburg, NJ, for about 460 billion won ($330 million), securing its first US manufacturing base as a hedge against possible hefty US tariffs on imported drugs.
Including operational funds, the South Korean biosimilar giant’s initial outlay will total around 700 billion won, the company said, adding that it will invest at least another 700 billion won for expansion and upgrades, bringing total spending to roughly 1.4 trillion won.
The 150,000-square-meter (37-acre) property includes four buildings, including manufacturing facilities, an R&D center and a storage, as well as room for expansion on about 36,000 square meters of vacant land.
Once the additional investment is completed, the plant’s production capacity is projected to be about 1.5 times greater than Celltrion’s second plant in Incheon, Korea, with a capacity of 90,000 liters.
The deal gives Celltrion an immediate US production base at a fraction of the cost of building a new plant and eliminates the risk of future tariffs on Korean-made drugs.
Washington has warned of import duties that could climb as high as 250% on foreign-made medicines, a threat that had already prompted Celltrion to ship two years’ worth of inventory to the US and expand its contracts with local contract manufacturers.
The acquisition confirmation comes about two months after Celltrion Chairman Seo Jung-jin unveiled a plan to spend roughly 700 billion won initially to buy a plant in the US as part of efforts to alleviate the US tariff risk.
BEST WAY TO COUNTER US TARIFFS
“This deal removes any tariff risk in the US and gives us a fully localized supply chain, from production through marketing,” a Celltrion spokesperson said.
“We’ll move quickly to optimize the plant and transfer operations, while we will keep investing in the plant to expand capacity and sharpen our global edge.”
The New Jersey plant, which operates under current Good Manufacturing Practices (cGMP), currently produces biologic medicines for Eli Lilly, which will continue for five years alongside Celltrion’s biosimilars under the terms of the agreement.
This is expected to help the Korean company not only generate immediate revenue but also recover its investment faster than if it had built a new plant.
The plant is also expected, after a 12- to 18-month validation period, to support the entire production cycle of Celltrion’s US lineup.
Celltrion is expected to start producing its flagship biologic copy drugs, such as autoimmune treatments Zymfentra and Yuflyma, as well as a targeted therapy anticancer medication, Vegzelma, at the US facility in the final quarter of next year, according to analysts.
Celltrion currently derives approximately 30% of its revenue from the US and aims to increase this share with its expanded American footprint.
The Korean company has been seeking a US manufacturing base since early this year in response to Washington’s warnings of steep tariffs on imported medicines. Its executives have scouted potential sites since April.
In late July, Seoul and Washington reached a new trade agreement, which also ensures most-favored nation (MFN) treatment for Korean chipmakers and pharmaceutical companies, setting tariffs of about 15% on Korean chip and drug imports.
But the two sides have not yet formally signed the deal.
Chairman Seo still sees US duties as a risk beyond the current Trump administration and is pushing to secure local manufacturing to minimize damages to Celltrion’s sales in the US, the world’s largest pharmaceutical market.
WHAT’S COMING NEXT
The two companies will extend their partnership for a while to ensure a seamless operational transition.
All existing employees at the Branchburg site will be retained, ensuring continuity of production for Eli Lilly’s drugs over the next five years, while Celltrion gradually adds its own product lineup.
Celltrion said its US subsidiary will carry out the purchase to ensure smoother operations and legal stability, with closing expected by year-end pending regulatory approvals.
After handing over the Branchburg plant, Eli Lilly, the developer of well-known diabetes and obesity treatment Mounjaro, is expected to focus on the development of peptide therapeutics, small molecules and nucleic acid therapeutics with new production sites, according to market analysts.
By Woo-Sang Lee
idol@hankyung.com
Sookyung Seo edited this article.
