Financial regulators accuse Samsung BioLogics of breaching accounting rules

By Lim Chang-won Posted : November 14, 2018, 19:33 Updated : April 3, 2019, 17:05

[Yonhap News Photo]


SEOUL -- The trading of Samsung BioLogics, a bio company affiliated with South Korea's largest Samsung Group, was suspended after financial regulators ruled that violated accounting rules in 2015 to inflate its profit ahead of its listing.

The decision by the Securities and Futures Commission (SFC) on Wednesday followed months of debate over whether BioLogics breached accounting rules. BioLogics has denied any accounting fraud, insisting it adopted international standards through consultations with outside experts when it was listed on the local bourse in 2016.

At that time, the company reported a net profit of 1.9 trillion won after staying in the red for four years. Wednesday's decision came at a meeting involving Financial Services Commission (FSC) vice chairman Kim Yong-beom, an SFC standing commissioner and three university professors.

"We concluded that in order to secure the legitimacy of changing its controlling power in 2015, Samsung BioLogics has deliberately violated accounting standards by arbitrarily interpreting and applying them," Kim said, adding the case was referred to prosecutors for a criminal investigation.

The commission decided to impose a fine of eight billion won against BioLogics and recommended the sacking of its chief executive. Even though BioLogics has no reason to change its judgment in 2015, it suddenly changed a subsidiary into a related company, Kim said.

South Korea's securities exchange operator has 15 days to review a possible delisting of BioLogics. Through its public offering in 2016, BioLogics raised some 2.25 trillion won, drawing widespread market attention because it's part of efforts by Samsung Electronics vice chairman Jay Y. Lee to realign the parent group's business portfolio.

In 2012, BioLogics set up Samsung Bioepis, a joint venture with U.S.-based pharmaceutical company Biogen. Last week, BioLogics completed the transfer of shares worth about 759 billion won to Biogen, which increased its stake to one share short of 50 percent.

The injection of cash would help Bioepis known for Imraldi, an adalimumab biosimilar referencing Humira, to increase liquidity and reduce debts for a stable operation.

The dispute began in May when financial regulators disclosed information on their provisional decision that BioLogics breached accounting rules, leading to a fall in the share prices of BioLogics. 
 
Bioepsis had been valued at market prices instead of its book value. By applying different accounting rules, its value surged from 290 billion won to 4.8 trillion won. BioLogics said a different accounting system was applied because the possibility of Biogen exercising its call option increased.

In July, the Financial Services Commission, a powerful financial watchdog, ruled that BioLogics left out important information intentionally about a call option deal with Biogen. BioLogics has denied any illegal activity, insisting the company has thoroughly verified all accounting procedures at the time of listing





 
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