'No plan to push for delisting of Samsung BioLogics'

By Kim Yoo-chul

A senior Financial Supervisory Service (FSS) official said it was unlikely that Samsung BioLogics will be delisted from the KOSPI as it was debatable whether the Samsung affiliate violated regulatory practices when it went public in 2016.

“Lots of factors and considerations should be reviewed, thoroughly, before taking any action on Samsung BioLogics. The Samsung affiliate has said an internal assessment concluded that it did not break accounting rules. But it's unlikely Samsung BioLogics will be delisted from the stock market,” said the official asking not to be identified because he wasn't authorized to officially speak to the media.

The response came a day after the drug manufacturing firm said it was planning to sue the FSS after it announced the Samsung affiliate had violated accounting rules to “deliberately inflate” its net profit before going public.

Samsung BioLogics said its decision to categorize Samsung Bioepis as a unit of Samsung BioLogics before 2016, was a part of its intent to get managerial rights after partner Biogen announced it was planning to exercise a call option to increase its stake to 49 percent. Samsung BioLogics joined hands with Biogen of the United States to create Samsung Bioepis.

“Biogen notified Samsung BioLogics in late 2015 to exercise its call option and the plan was persuasive because the U.S. business partner left its plan unchanged. We just wanted to put more of our side on the board following fair regulatory practices,” said Samsung BioLogics spokesman Seo Hae-su.

Accounting experts told Samsung BioLogics that according to IFRS rules, an international accounting guideline, Bioepis would need to be categorized as an affiliate and not a unit to make the call option. That would mean the stake would have to be reflected in BioLogics' books by fair value, not book value.

“The change to fair value and the ensuing net profit had been approved by KPMG Korea, Deloitte Korea and PricewaterhouseCoopers Korea, and the matter was fine to go by the FSS when the company released the 2015 books in 2016,” said the spokesman, adding Samsung BioLogics plans to submit papers to back up its position.

The FSS said the Samsung BioLogics issue will discussed in a meeting with senior officials at the Financial Services Commission (FSC), May 10. The FSC oversees financial policies and directs the FSS. Results from the meeting will be notified to the Korea Exchange (KRX), the main bourse operator, which will assess the qualification of the Samsung BioLogis listing.

“Business performance, management transparency and measures to protect investors are key factors for the KRX when removing poor performers or rule breakers from the index. But what we are worried about is if Samsung BioLogics is delisted, then that could freeze investor sentiment on the entire bio- and bio-related sectors,” Jin Heung-kook, a senior analyst at Korea Investment, said.

The latest trouble is the newest controversy to hit the Samsung affiliate after Samsung Securities' damaging fat finger mistake last month. It also follows on the heels of U.S. hedge fund Elliott launching a legal case against the Korean government over a 2015 merger between Samsung affiliates.

Shares of Samsung BioLogics declined by 3.47 percent to end at 390,000 won on the main bourse, KRX data showed.