As Celltrion sharply lowered the sales target for Zympentra, an autoimmune disease treatment it touted as a flagship product, minority shareholders began demanding the cancellation of treasury shares and a restoration of management credibility. They plan to pursue legal action if the company refuses to convene an extraordinary shareholders meeting.
According to the pharmaceutical industry on the 14th, the emergency committee of Celltrion minority shareholders has launched an offline equity collection campaign to convene an extraordinary shareholders meeting. The committee plans to finish collecting shares and cross-checking the shareholders register within this week and then formally begin the procedures to convene the meeting.
The head of the Celltrion minority shareholders emergency committee said in a phone call with ChosunBiz that a request to convene an extraordinary shareholders meeting will be sent to the company next week, adding that if the company refuses, the committee will begin legal procedures.
Agenda items to be submitted by the committee include: restoring the board's oversight function; strengthening management transparency; introducing cumulative voting; canceling 100% of treasury shares held; and establishing a new clause restricting spin-off listings of affiliates. In particular, by introducing cumulative voting, the goal is to allow minority shareholders to concentrate their votes on a single candidate to facilitate the appointment of a CEO who represents minority shareholders.
Minority shareholders are demanding the prompt cancellation of treasury shares to enhance shareholder value. The committee said, cancel all 500 billion won in treasury shares purchased this year within the year as promised to shareholders, and additionally cancel the treasury shares purchased before that, adding that delaying the cancellation of treasury shares is further undermining trust. Earlier, the committee sent the company a request titled "Implementation of measures to enhance shareholder value and fulfillment of promises" last month.
Chair Seo Jung-Jin publicly pledged to cancel 500 billion won worth of treasury shares at a press briefing ahead of the 2023 merger with Celltrion Healthcare, saying, our stock is undervalued, so we are buying treasury shares. The company has purchased 850 billion won in treasury shares through this year and completed cancellations totaling 900 billion won, and it is pushing to cancel the remaining 100 billion won.
What decisively fueled shareholders' anger was Chair Seo's reversal of the sales target for Zympentra. In March last year, Seo presented this year's Zympentra sales outlook at 1 trillion won, but lowered it to 700 billion won at a corporate presentation for Hong Kong investors in November of the same year.
At an online press briefing in September this year, it was lowered again to 350 billion won. Seo said, Zympentra's listing is being delayed at one of the three major U.S. pharmacy benefit managers (PBMs), adding that there was an error in judging the distribution structure.
Brokerages also assess that achieving this target will be difficult. iM Securities, in a recent report, presented an annual sales outlook for Zympentra of 101.3 billion won, lowering it by 70 billion won from its previous forecast.
Zympentra is an autoimmune disease treatment for which Celltrion received new drug approval from the U.S. Food and Drug Administration (FDA) in Oct. 2023. It is a subcutaneous (SC) formulation developed from Remsima, a biosimilar of Johnson & Johnson (J&J)'s Remicade (infliximab), shifting from intravenous (IV) infusion to enhance patient convenience. It was launched in the U.S. market in March last year.
The market is currently focusing more on the growth of new biosimilars such as Eydenzelt and Aptosma than on Zympentra. However, analysts say these products also need time for U.S. insurance listing, including PBMs, and for market share to stabilize. With the stock price continuing to underperform, shareholder dissatisfaction is growing.
The head of the minority shareholders alliance emergency committee said, Celltrion now needs a major overhaul of its governance, emphasizing that rather than short-term results, a credible governance reform and transparent management are what the market demands.
The person added, The company can restore trust with the market only by carrying out the commitments made at shareholders meetings and briefings and by stopping providing excuses for short selling through empty sales targets.
Regarding this, Celltrion said there is no official position.