April 23, 2024

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[THE INVESTOR] Korea’s contract drug maker Samsung BioLogics said on Oct. 23 that it has logged an operating loss of 10.5 billion won (US$9.30 million) in the three months ending Sept. 30, down 48.8 percent from the same period last year due to decreased utilization rate of its plants.

Revenue declined 20.7 percent to 101 billion won and net loss narrowed to 30.1 billion won from 31.7 billion won a year earlier. 

The company blamed capacity utilization of its first and second production sites for the weak results citing that the rate was lowered with requisite changes in the biologic product mix over the period.

The net loss stemmed from unrealized intercompany losses and gains due to biosimilar products of its affiliate Samsung Bioepis, it said.

Analysts here expect the company will show earnings improvement in the fourth quarter after the trough in the third.

“In the fourth quarter, its cash flow will increase with call option payment from Biogen as well as receipt of termination fee from Merck for canceling the co-development agreement for Lantus biosmilar,” said Jin Heung-kook, an analyst at Korea Investment & Securities.

Biogen is expected to pay some 757.3 billion won to Samsung BioLogics to exercise its option to increase its stake in Samsung Bioepis -- the two firms’ joint venture -- to 49 percent.

Merck will pay the Incheon-based firm US$155 million to cover investments made thus far in the follow-on insulin glargine product referencing Sanofi’s Lantus as it terminated the deal to develop and commercialize the biologic therapy earlier this month.

Samsung BioLogics said it has secured manufacturing orders to fully run the two plants and is in talks with global clients to win orders for its third site, the world’s largest single bio manufacturing plant boasting a production capacity of 180,000 liters, which began operations on Oct. 1.

The financial results come amid ongoing controversy between the biologics contractor and the country’s financial regulators over the firm’s bookkeeping practice.

The Securities and Futures Commission, auditing and decision-assisting arm of the Financial Services Commission, will hold a meeting on Oct. 31 which Samsung BioLogics CEO Kim Tae-han will attend, to look into the firm’s accounting practices, according to a company official.

“What’s more important than the earnings is the result of the SFC meeting regarding the accounting breach allegations ... to ease uncertainty,” Jin said.

The key issue at the meeting will be a change in accounting methods for its stake in Samsung Bioepis, which showed a surprising turnaround in 2015.

In July, the financial regulator ruled that the firm had breached accounting standards and deliberately omitted certain disclosures although it was aware of the possibility of a violation but postponed to make a conclusion on key issues relating to Samsung Bioepis.

In response, the company filed a suit against the SFC on Oct. 8 to counter its punitive measures including a request for dismissal of executives.

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