ShillaGen, Tuition for Korean Bio-Ecosystems

In this paper, I analyze the story of ShillaGen, which made headlines between 2016 and 2020, as an example of startup failure research. In 2014, ShillaGen acquired its collaborative research partner, Jennerex, to conduct a global Phase III clinical trial of its Oncolytic Virus drug candidate, Pexavec, but failed to develop a new drug by prematurely terminating the trial after failing to pass the futility assessment by an Independent Data Monitoring Committee in 2019. As a result, ShillaGen’s stock price, which had risen to the second largest market capitalization on the KOSDAQ, plummeted after the trial was terminated, and key executives, including the CEO, were exposed for stock sales and embezzlement. This paper reconstructs the challenges and failures of ShillaGen based on available publications and interviews with two company officials, and analyzes the factors that led to its failure at the corporate, industry, and national levels. It shows that startup scandals should be viewed as a distinction between illegal behavior and normal corporate activities, and that lessons can be learned from both for startup strategies, industry ecosystems, and national institutions. If the lessons learned can be used to improve institutional weaknesses in the Korean bio-ecosystem, the ShillaGen case can serve as tuition for the maturation of the Korean bio-ecosystem.