April 19, 2024

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[THE INVESTOR] Celltrion founder and CEO Seo Jung-jin stepped aside for professional management of his phenomenally successful bio venture last year as it prepared to roll out cheaper alternatives to expensive biotech drugs from global pharmaceutical giants.

In a startup’s lifecycle, the founder’s relinquishing of his or her management control is considered a critical juncture, which, ideally, could lead to a new era of growth.

But few took the change of CEO at Celltrion as the beginning of the post-Seo era. 

While the 59-year-old founder’s post has been elevated to chairman, two of his most trusted men from his years at the now-defunct Daewoo Motor, who joined him in founding Celltrion, now run the company as co-CEOs.

At Celltrion Pharm, a listed affiliate of Celltrion, Seo’s younger brother, Jung-ju, is the chief executive.

As for equity ownership, Seo continues to have a grip on the Kosdaq-listed Celltrion via his personal company Celltrion Holdings.

Celltrion Holdings has a 19.28 percent stake in Celltrion, supplemented by a combined 3.03 percent stake owned by Celltrion GSC, a procurement arm of Celltrion that is 71 percent owned by Seo and over 30 friendly individuals including executives of Celltrion and its affiliate companies.

The second-largest shareholder is ION Investment, an investment arm of Singapore’s Temasek Holdings, with 14.3 percent of shares. The rest, or about 63 percent, are free floats.

Theoretically, 22 percent is not enough to make Seo immune to hostile takeover bids. But, as long as the No. 2 shareholder is on his side, the chairman’s control can be considered solid, said analyst Koo Ja-yong of Dongbu Securities.

“Celltrion shares are widely dispersed. There seems to be no force right now with a meaningful number of shares who can pose a threat to the chairman,” he said. 

Related article:
Enigma of Seo Jung-jin

By law, a shareholder must make a public disclosure when his or her holding in a listed company exceeds 5 percent. Other than the No. 1 and No. 2 shareholders, no Celltrion investors have made the disclosure.

Through a 94 percent stake in Celltrion Holdings, Seo organizes Celltrion and several other businesses that he founded or acquired.

Celltrion Holdings own 19.3 percent of Celltrion, which then controls 48.8 percent of Celltrion Pharm, which focuses more on the domestic market. Pharm, in turn, owns 100 percent of the R&D unit Celltrion Chemical Research Institute.

Seo personally owns 46.4 percent of Celltrion Healthcare, which has the exclusive rights to market and sell the company’s flagship and most promising drug, the Remsima.

The entrepreneur also holds 71 percent shares of Celltrion GSC which in 2013 acquired 100 percent of Hanskin, a local cosmetic brand now renamed to Celltrion Skincure.

Dream E&M, wholly owned by Celltrion Holdings, is Seo’s latest venture into Korea’s hot entertainment scene, investing in TV dramas.

The current corporate-governance setup, however, may undergo a key change, with Celltrion Healthcare preparing for an initial public offering.

At an investor relations session late last year, Celltrion Healthcare CEO Kim Hyoung-ki said the company could merge with Celltrion in two or three years after the planned floatation. 

“For the merger to have a fair ratio, I think it’s good to have the companies‘ value judged by the market,” he reportedly said.

Seo himself hinted at the possibility of such a move earlier in the year.

“The merger is one of the options that we are considering. Nothing has been decided,” said Celltrion spokesperson Lee Kun-hyuk. Celltrion Healthcare will make the IPO, but when this will happen is also not decided, he added. 

A local law governing internal trade at big business groups is a factor in deciding the relation between Celltrion and Celltrion Healthcare, analysts say.

Korea’s fair trade rule bans conglomerates from channeling contracts to listed companies that are 30 percent or more owned by their controlling families.

As Celltrion sells its products exclusively through Celltrion Healthcare, which is 46 percent owned by Seo, it is subject to this ban. 


By Lee Sun-young/The Korea Herald (milaya@heraldcorp.com)