Samsung BioLogics to sue gov't over accounting rules
Samsung BioLogics Vice President Shim Byung-hwa speaks during a hurriedly-arranged news conference at the Korea Chamber of Commerce and Industry building in downtown Seoul, Wednesday. Yonhap
By Kim Yoo-chul
Samsung Biologics, the bio contract manufacturing organization of Samsung Group, said Wednesday it plans to sue the country's top financial regulators as the latest findings by the Financial Supervisory Service (FSS) through which it claimed the Samsung unit breached accounting rules are “groundless.”
“Samsung Biologics simply wants to make sure that there was no motivation to inflate the value of Samsung Bioepis when we separated Samsung Bioepis from Samsung BioLogics before the listing in late 2016. Samsung BioLogics plans to file an administrative lawsuit with local courts seeking for the correction,” Kim Dong-jung, chief financial officer at Samsung BioLogics said in a hurriedly-arranged news conference held in downtown Seoul.
The FSS notified the group's biosimilar drug-manufacturing unit of the results of its preliminary finding to under which Samsung BioLogics “deliberately cooked and inflated” the company's book value.
Shares of Samsung BioLogis tumbled 17.21 percent to end at 404,000 won on the KOSPI index, data provided by the Korea Exchange (KRX), the country's main bourse operator, showed.
“Samsung BioLogics asked the FSS, Financial Services Commission (FSC) and KRX to review the preliminary findings by the FSS,” the company executive said in the conference packed with over 150 reporters from the domestic and foreign media.
The FSS released a statement that it had begun an investigation into Samsung BioLogics as an activist group questioned last year whether the Samsung affiliate had breached accounting rules to inflate its net profit before its listing.
“Our rationale is that Samsung BioLogics has inflated the value of its holdings of Samsung Bioepis as the former recognized the latter as a 'related company,' helping Samsung BioLogics reflecting the value of its holdings on Samsung Bioepis based on market price, not an original price. This was against accounting rules,” FSS said in the statement.
Samsung BioLogics reported 1.9 trillion won as its net profit in 2015, compared to a 28 billion won net loss in 2014 and a 62.4 billion won net loss in 2013. But stock analysts say the net profit was not a “prerequisite” for Samsung BioLogics to list in 2016 as the KRX had applied new rules allowing companies with “growth potential” to list, despite a net loss.
Samsung BioLogics earlier partnered with Biogen of the United States to create Samsung Bioepis. Samsung BioLogics owns a 91.2 percent stake in Samsung Bioepis, while its U.S. partner holds 5.4 percent of Samsung Bioepis and a “call option” to increase its stake in the Bioepis unit to 50 percent, plus one share by June this year.
“The reason we changed the status of Samsung Bioepis as a 'related company' from an affiliate was due to scenarios that Biogen may exert its 'call option' given the growth of the biosimilar business. We want to control the entire business and that decision is the result of consultations by large accounting firms,” said the executive.