Contract development and manufacturing organization (CDMO) corporations Samsung Biologics has signed a series of increased contract manufacturing (CMO) deals this month with European and U.S. pharmaceutical companies. With additional orders from existing clients continuing, attention is on whether the company can shake off concerns of "order slowdown" raised by prolonged labor-management conflict and keep its growth on track.
According to the Financial Supervisory Service's electronic disclosure system on the 23rd, Samsung Biologics has released three announcements this month on increased contracts.
After the market closed the previous day, the company said it increased a drug contract manufacturing deal signed with a Asia-based pharmaceutical company from about 144.6 billion won to about 215.9 billion won, an increase of about 71.3 billion won. The contract period was also extended from the original 2028 to 2037. The counterparty will be disclosed in 2037 for reasons of trade secret confidentiality.
Earlier, on the 9th, the company said it signed an increased contract manufacturing (CMO) deal worth about 50.7 billion won with a European pharmaceutical company. After the initial contract of 279.6 billion won in March, additional orders led to an increase in April and another increase this time, bringing the total contract value to about 400.7 billion won.
Also, on the 17th, the company said it signed an increased contract worth about 98.3 billion won ($68.56 million) with a U.S.-based pharmaceutical company. The contract value expanded from about 737.3 billion won initially in April last year to about 835.6 billion won. The companies that signed the deals will be disclosed in 2031 and 2032, respectively.
Adding up the three increased contracts the company released this month, the additional orders alone total 220.3 billion won. Reflecting this increase, Samsung Biologics' cumulative order backlog (based on minimum purchase quantities) will rise from $10.272 billion (about 15.408 trillion won) at the end of the first quarter to about $10.422 billion (about 15.633 trillion won). The won figures were converted using an exchange rate of 1,500 won per U.S. dollar.
According to the company, combining one new contract signed this year (279.6 billion won) with the contracts increased so far this month, the total contract value is about 579.4 billion won.
In the market recently, optimism and concern are surfacing at the same time over whether the company can overcome internal and external uncertainties and sustain its growth.
Brokerages still see the company's mid- to long-term growth drivers as intact. However, there are views that variables such as labor-management conflict, changes in U.S. trade policy, and war could affect short-term growth.
In the market, there is an outlook that the BIOSECURE Act, which the United States is pushing to keep Chinese bio corporations in check, will expand global pharmaceutical companies' demand to diversify supply chains. If moves to reduce dependence on Chinese corporations spread, analysis suggests that Samsung Biologics and other CDMO corporations could benefit as a byproduct.
Expansion of production volume at the fifth plant, which the company began operating this year, is also cited as a factor for earnings improvement. The company also expects that the effect of acquiring the Rockville production facility in Maryland, securing a production base in the United States after completing the acquisition in the first quarter, will be reflected in results in stages. From this perspective, Shin Ji-hoon, an analyst at KB Securities, gave Samsung Biologics a "buy" rating and set a target price of 1.9 million won.
Earlier, the company also offered annual revenue growth guidance of 15%–20% for this year. Based on last year's revenue (4.57 trillion won), this year's revenue is expected to be in the range of 5.2 trillion–5.5 trillion won.
However, labor-management conflict has emerged as a variable. At Samsung Biologics, labor and management have been in conflict for months over wage increases and personnel system reforms.
The Samsung Biologics Win-Win Chapter of the Samsung Group Super-Enterprise Labor Union (hereafter Samsung Biologics union) carried out a full strike for three days in early May following a partial strike in April. At the time, some production processes, including anticancer drugs and human immunodeficiency virus (HIV) treatments, were affected. The company estimated production disruptions at about 150 billion won.
The labor-management conflict has also led to legal disputes, and talks conducted under the mediation of the Ministry of Employment and Labor (MOEL) broke down last month. Talks are currently proceeding autonomously. The union is demanding an average 14% wage increase and payment of incentives, while the company has proposed a 6.2% increase. The company's union is currently continuing a work-to-rule campaign by refusing overtime and holiday work.
In the securities industry, there is close watch on how a prolonged labor-management conflict could affect the company's production stability and profitability.
Seo Geun-hee, an analyst at Samsung Securities, lowered the operating profit forecast for Samsung Biologics and cut the target price from 2.1 million won to 1.8 million won in a report last month, reflecting the burden of rising labor costs. The change reflects an analysis that this year's estimated labor costs for the company could rise 75% from the previous estimate to 293.1 billion won.
The Samsung Biologics union plans to hold a member vote on June 24–28 on whether to withdraw from the Samsung Group Super-Enterprise Union. Inside the union, opinions are reportedly divided over strengthening bargaining power by shifting to an independent line versus the impact of leaving the joint response framework.
A company official said, "We plan to continue dialogue between labor and management and faithfully engage in negotiations."