Celltrion set a new milestone last year by surpassing 4 trillion won in annual sales and 1 trillion won in operating profit for the first time. The strong leadership of founder and chairman Seo Jung-Jin, who developed a biosimilar and pioneered the global market after the company's founding in 1991, is again drawing attention.
Recently, the standing of the chairman's eldest son, Seo Jin-seok, Celltrion head of the business division and CEO/president, and younger son, Seo Jun-seok, Celltrion head of North America and senior vice chairman, has also grown. As a result, some have raised the possibility of a generational shift and succession.
But the succession picture at Celltrion is still foggy. Considering the massive inheritance tax, some say there is no realistically feasible path to succession. This is why people inside and outside the group often say, "The chairman needs to stay healthy for a long time."
◇ Eldest and younger sons gain clout, but hold less than 1% equity
About 10 years after first joining the Celltrion Biotechnology Research Institute in 2014, eldest son and CEO Seo Jin-seok now holds 3,254 shares of Celltrion, with an equity stake of less than 1%.
Seo first acquired treasury shares in Sept. 2024 by purchasing 495 shares on the open market. The purchase price at the time was 202,000 won per share, about 100 million won in total. He was said to have decided on the acquisition in consideration of shareholders' calls to strengthen accountable management. He also did not directly secure equity in Celltrion Holdings.
Younger son Seo Jun-seok, Celltrion head of North America and senior vice chairman, has no disclosed equity holdings. After joining Celltrion in 2017, Seo served as an inside director of Celltrion Healthcare and as chair of the board, and now oversees Celltrion's North American business, including the United States and Canada.
Given that Celltrion is focusing on the U.S. market, including the 2024 U.S. launch of the autoimmune disease treatment Zympentra (infliximab) and the planned acquisition of a U.S. production facility in 2025, his standing is seen as rising.
Although both have grown more influential on the management front, the structure makes succession difficult. The biggest hurdle is taxes. Celltrion Group's governance currently has Chairman Seo Jung-Jin at the top with 98.13% equity in the unlisted holding company Celltrion Holdings, under which sit Celltrion and Celltrion Pharm.
The market values the equity in Celltrion Holdings owned by the chairman at 10 trillion to 11 trillion won. In calculating inheritance tax, up to a 20% premium is applied to the controlling stake held by the largest shareholder. If the top inheritance tax rate of 50% is applied, the tax burden at the time of inheritance could reach 6 trillion to 7 trillion won, analysts say.
That is an amount difficult to cover with cash. Chairman Seo Jung-Jin also said at a 2023 briefing on the proposed merger with Celltrion Healthcare, "Because I would have to pay 6 trillion to 7 trillion won in inheritance and gift tax, succession is virtually impossible."
◇ Succession scenarios are discussed, but no clear path is visible
The market is discussing several succession methods. One is selling shares and paying in kind with stock, but in that case the equity ratio could plunge and management control could be shaken.
Celltrion has bought back and canceled treasury shares in recent years. The company has said this was part of a shareholder return policy to boost an undervalued stock price. Some in the market have said this could be preparatory work with succession in mind.
When treasury shares are canceled, the number of outstanding shares decreases and existing shareholders' equity ratios automatically rise. As a result, the chairman's control is relatively strengthened, which can help cushion any weakening of control from gifts or inheritance.
But this does not directly reduce the tax burden. Inheritance tax is levied based on the market value of the shares, not the equity ratio. If the stock price rises after cancellation, the burden could actually grow.
There is also the option of the chairman gifting Celltrion Holdings equity to his children over a long period. Spreading out the timing can help soften the shock. However, given the large value of Celltrion Holdings equity itself and the children's stakes, there are limits to completing succession through gifts alone, critics note.
Another method is to disperse the succession burden through mergers or governance restructuring centered on Celltrion Holdings, but it is essential to meet requirements under the Commercial Act and tax laws, as well as to align interests with minority shareholders.
An industry official said, "It depends on how the chairman transfers Celltrion Holdings equity to a successor, but practically viable solutions are hard to see."
Given the situation, seeking a path for succession has become a back-burner issue even within the Celltrion group.
A group official said, "We are focusing on successfully pushing new businesses based on earnings growth to leap to a global big pharma," adding, "We are not pursuing succession work or considering any specific succession method."