Hall of Shame

Health Care

Celltrion Inc (068270 KS)

Year: 2016

Celltrion Inc is a Korea-based company mainly engaged in the production and sale of bio pharmaceuticals. The Company operates its business through two segments. The Bio Pharmaceutical segment is mainly engaged in the development, production and sale of biosimilar products. The Chemical Pharmaceutical segment is mainly engaged in the manufacture and sale of chemical drugs. In addition, the Segment sells bio and chemical drugs, and provides services such as data analysis. The Company's main products include liver and bowel medicines and other generics. The main merchants sold by the Company include autoimmune disease treatment agents, anti-malignant tumor drugs, anti-malignant tumour drugs, and other merchants. The Company sells its products in domestic and overseas markets such as Europe and the United States.

Celltrion listed on the Korea's secondary KOSDAQ market in 2009 through a reverse takeover. 

October 28, 2012 The Wall Street Journal published an article "The Tale Beneath the Top Line at Celltrion" pointing out that Celltrion was booking substantial sales to Healthcare which were simply accumulating on the latter’s balance sheet.

May 9, 2013 The price of stock in Celltrion plunged on news that its chief is under investigation for alleged involvement in stock price manipulation. The Financial Supervisory Service (FSS) is investigating the company and its chairman Seo Jung-jin for allegedly having ties with speculative investors who have been engaged in short-selling the firm’s shares.

October 8, 2013 South Korea's financial watchdog announced its decision to lodge a complaint with the prosecution against the head of bio-pharmaceutical firm Celltrion Inc. for alleged stock-price rigging.

February 28, 2016 Ghost Raven Research (GRR) published a report alleging that Celltrion was “a massive accounting fraud”.  In its executive summary it raised the following points:

  • Many of the masterminds behind the fraud at Daewoo Motors had resurfaced at Celltrion to commit an almost-identical fraud,
  • Celltrion was only able to generate sales by offloading unwanted product to Celltrion Healthcare, to allow Celltrion to fabricate sales and hide excessive levels of debt and inventory,
  • GRR believed that “real” end-market sales were over 90% lower than claimed by Celltrion.
  • Celltrion and its investors lent money to related parties who then used that money to “buy” goods from Celltrion – which allowed the company to create a never-ending flywheel of fake financing cash flows turning into fake revenues and profits,
  • As Celltrion’s true sales were a tiny fraction of reported sales, inventory was piling up. The listed company inventory balance was very high, but the true inventory pile was comical when aggregating the balances at controlled related parties.
  • Celltrion aggressively capitalised research & development and interest expense. If these were properly recognized as cash expenses, Celltrion’s profitability would have fallen by over 80%.
  • With little real sales and lots of fake ones, Celltrion was unable to generate positive operating cash flow. The company operated in a capital intensive business, so high capital expenditures further pressurised the balance sheet. As a result, Celltrion burnt tons of cash and hid most these losses at controlled related parties. The cash flow hole was plugged through a large and increasing mountain of debt that was also hidden at controlled related parties.
  • Many competitors were poised to enter Celltrion’s market over the next two years, which would destroy pricing and market share.

In conclusion GRR believed that Celltrion was the largest non-manipulated fraud in the stock market. It believed that Celltrion had revenues 90% below what they claimed, and operating expenses more than 50% above what they claimed. The true financial picture was that Celltrion was a tiny company burning tons of cash, with way too much inventory and way too much debt. It believed that were Celltrion to report accurate financial statements, it would have collapsed as one of the largest frauds in world history. Even based on fundamentals alone, GRR thought the stock was overvalued by more than 50%.

March 8, 2016 Celltrion responded to the report with a statement saying "We believe that the short sellers of Celltrion stocks must have taken huge losses, and they are circulating these false reports to recover their damages".

September 2017 Celltrion Holdings was fined 2.4 billion won (US$2.1 million) for violating standards on holding subsidiaries’ stocks along with a correction order from authorities.

February 1, 2018 GMT Research reviewed the Celltrion's financials in its 2017 3rd quarter release.  It issued a report, "Gaming the accounting".  GMT said that since 2010, Celltrion had generated 98% of its sales from its sister company, Celltrion Healthcare, which had been unable to sell 55% of the product that it’s bought. Celltrion Healthcare appeared to have been established to buy unapproved drugs from Celltrion. GMT believed it was highly unlikely that an outside third party would have bought these drugs, and questioned the economic substance of these past transactions for Healthcare. GMT thought Celltrion’s profits were significantly overstated, by as much as two-thirds in 9M17, owing to continued channel stuffing at Healthcare and the capitalisation of R&D costs.  GMT applied a 50% discount to 2018 consensus forecasts and assumed a generous 30x P/E multiple to derive a Celltrion target price of KRW65,000/share, 80% below its then levels.

August 1, 2018 A report in the Korea Times stated that Celltrion was suspected of giving favours to a firm run by the Chairman's relative. In response, an official from Celltrion dismissed suspicions of sweetheart deals, saying, "As far as we know, the transactions with the companies are related to security issues."

December 11, 2018 The Financial Supervisory Service (FSS) launched an investigation into Celltrion Healthcare. The FSS suspected that the company had violated accounting rules when it sold the right to sell biological medicines in the Korean market back to Celltrion Inc. for 21.8 billion won.

The KoreaTimes: CEO scandal hits Celltrion stocks, 9 May 2013
The Korea Times: Celltrion CEO under scrutiny, 16 Sep 2013
Yonhap News Agency: Regulator to lodge complaint with prosecution against Celltrion head, 8 Oct 2013
The Korea Times: Celltrion stocks plunge on 'CEO risk', 5 Feb 2014
Ghost Raven Research: Celltrion Report, 8 Feb 2016
Fierce Pharma: South Korea's Celltrion dismisses Ghost Raven report as short-seller gambit, 21 Mar 2016
The Korea Times: Celltrion's cash flow comes under doubt, 9 Sep 2016
Business Korea: Celltrion Holdings Fined for Not Holding 20% or More Stake in Subsidiary, 7 Sep 2017
Business Korea: Celltrion Suspected of Giving Favours to a Firm Run by Chairman's Relative, 1 Aug 2018
Business Korea: FSS launches audit of Celltrion Healthcare for alleged accounting malpractices, 11 Dec 2018
Celltrion: Consolidated Financial Statements YE Dec. 2016
Celltrion: Consolidated Financial Statements YE Dec. 2015
Celltrion: Consolidated Financial Statements YE Dec. 2014



Company From To
PwC - -
Ernst & Young - -


(IPO - Initial Public Offering, ASO - Additional Share offerings)

Type Date Role Party
ASO-1 12-May-10 Joint Lead Managers-Books Goldman Sachs
ASO-1 12-May-10 Joint Lead Managers-Books KB Investment & Securities Co Ltd
ASO-1 12-May-10 Legal Adviser(s) to the Manager(s) Kim & Chang
ASO-2 7-Mar-18 Joint Lead Managers-Books Citigroup
ASO-2 7-Mar-18 Joint Lead Managers-Books Goldman Sachs
ASO-3 23-Oct-18 Joint Lead Managers-Books Citigroup
ASO-3 23-Oct-18 Joint Lead Managers-Books Credit Suisse
ASO-4 2-Apr-20 Joint Lead Managers-Books Citigroup
ASO-4 2-Apr-20 Joint Lead Managers-Books Morgan Stanley
ASO-4 2-Apr-20 Legal Adviser(s) to the Manager(s) Paul Hastings LLP
IPO 19-Jul-05 Auditor(s) Deloitte
IPO 19-Jul-05 Lead Manager Hanwha Securities
IPO 19-Jul-05 Lead Manager(s) Hanwha Securities


(CAC/MAC Chairman / Member Audit Committee - NC Nomination /Governance Comm. - CC Compensation/Remuneration Committee)

Type Name Role From To
Executive Min Chul Shin 27-Mar-20 -
Executive Hyuk Jae Lee 27-Mar-20 -
Executive Jin Seok Seo Chairman 26-Mar-21 -
Independent Jae Sik Lee CAC, MCC, MNC 27-Mar-20 -
Independent Soon Woo Lee MAC, CCC, MNC 27-Mar-20 -
Independent Dae Hyun Yoo MAC, MCC, CNC 27-Mar-20 -
Independent Won Seog Kim MAC, MCC, MNC 27-Mar-20 -
Independent Keun Young Kim MAC, MCC, MNC 27-Mar-20 -
Senior Management Woo Sung Kee CEO 27-Mar-20 -