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The Korea Herald
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THE INVESTOR
March 19, 2024

Bio

How Samsung BioLogics changed after accounting fraud allegations

  • PUBLISHED :May 21, 2018 - 17:45
  • UPDATED :May 21, 2018 - 23:38
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[THE INVESTOR] Over the past three weeks, Samsung BioLogics has been facing drastic changes inside and out after the country’s financial authorities alleged that it had intentionally misapplied an accounting method to inflate its profit in 2015.

While the final decision on Samsung BioLogic’s fate is expected to come on June 6, the allegations have already taken a toll on its current status and future prospects including its share price. The company will deliver its second round of defense before authorities on May 25. 





Cash inflow from Biogen

US biotech Biogen’s decision to raise its stake in Samsung Bioepis, a biosimilar developer and joint venture with Samsung BioLogics, to 49.9 percent from current 5.4 percent, will create a positive cash flow for Samsung BioLogics’s third-quarter financial statement.

If Biogen exercises its call option to purchase a bigger stake in Samsung Bioepis by end-June, it is required to pay Samsung BioLogics some 700 billion won (US$644.32 million).

The amount includes 461 billion won of buying some 9.22 million shares of the biosimilar maker at 50,000 won per share and the rest will be interest payments, according to a company official.

Its debt to total assets ratio, the indicator of financial leverage, will make a significant improvement with the deal from the current 88 percent. Its debt stood at 3.35 trillion won as of end-March.

“We anticipate that it will take about two to three months for the completion of formal procedures including those related to international transfer and deposit of funds and merger control approvals, after which Biogen will transfer around 700 billion won to Samsung BioLogics,” the Korean company said.



Possible credit rating cut

Korea Ratings has notified Samsung BioLogics that it could downgrade the contract drug maker’s credit rating outlook amid the ongoing concerns.

The agency is expected to lower Samsung BioLogics’s rating outlook to AA-, with a negative outlook, from AA-, with a stable outlook, if the Incheon-based biopharmaceutical firm is found guilty of breaching accounting rules.

“We received notification from the agency last week of its possible action. Even if they take action, it will be just about the outlook not for actual rating,” the company official said.



Declining share price & market cap

Samsung BioLogics has lost 5.16 trillion won in market capitalization over the last three weeks from the day before the financial authorities announced the tentative ruling over accounting fraud allegation on May 1.

The company is now the seventh-largest among KOSPI-listed firms with a market value of 27.14 trillion won, which was once in third when its share price hit a record-high in April.

After launching its initial public offering in November 2016, the company quickly emerged as a heavyweight stock to threaten its crosstown rival Celltrion and Switzerland-based contract drug manufacturer Lonza. Now it lags behind Celltrion.

By Park Han-na (hnpark@herladcorp.com)

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