|Shim Byung-hwa (left), Samsung BioLogics’ business innovation team leader, and two other executives explain the company’s positions about its alleged financial violations, in a hurriedly arranged news conference at the Korea Chamber of Commerce and Industry Wednesday.|
Samsung BioLogics said Wednesday it had not committed any financial wrongdoing, in response to the Financial Supervisory Service’s (FSS) notice that it breached accounting rules.
On Tuesday, the financial regulatory agency gave preliminary notice to Samsung BioLogics and its auditors, explaining about the measures it could take concerning the alleged accounting breach. The company’s shares plummeted to 407,500 won ($379) as of 3:00 p.m., a 16.5 percent decrease from the previous trading day.
At a hurriedly arranged news conference, a Samsung executive said, “Our company did not violate any accounting regulations as it applied the International Financial Reporting Standards (IFRS) after consulting with outside experts.”
Shim Byung-hwa, Samsung BioLogics business innovation team leader, went on to say, “Also, to classify as accounting fraud, we would have had to reap benefits from the accounting violations, but we did not.”
The key factor, in this case, is whether Samsung BioLogics violated the relevant accounting standards when it changed Samsung Bioepis from its subsidiary to an affiliated company at the end of 2015.
Samsung Biologics had turned Samsung Bioepis, in which the company owned a 91.2 percent stake by the end of 2015, into an affiliate firm ahead of the former’s initial public offering on Nov. 10, 2016. In September of the same year, Samsung Bioepis received sales approval for its biosimilars, Brenzys (Original: Enbrel) and Renflexis (Original: Remicade).
Samsung BioLogics turned to profit after changing the company value of Samsung Bioepis from book value, also known as acquisition value, to market value, also known as fair value. The FSS had pointed out that this process did not follow proper accounting regulations.
Shim said, however, “We turned out subsidiary Samsung Bioepis into an affiliate firm as it became more feasible for Biogen, our joint venture partner, to exercise its call option as the results of Samsung Bioepis’ development of its first biosimilar product.”
Biogen is a multinational pharmaceutical company that established Samsung Bioepis jointly with Samsung BioLogics. It has a call option right to secure just below 50 percent shares in Samsung Bioepis. Currently, the company owns a 5.4 percent share in Samsung Bioepis. Biogen had also announced its plans to utilize its call option and secure up to 49.9 percent stake in Samsung Bioepis in February.
Shim also added that the company had inquired to Biogen about its plans to make the most of its call option when the company was planning to list Samsung Bioepis on NASDAQ, the U.S. stock exchange, in 2015.
“During that time we received a letter from Biogen stating that the company planned to use its call option,” Shim said.
Shim also strongly refuted allegations that the company had solely decided to turn Samsung Bioepis into an affiliate firm ahead of its PO.
“During our IPO, all accounting procedures were thoroughly verified and approved by the three major local accounting firms-- KPMG Samjung, Deloitte Anjin, PwC Samil,” Shim said. “We also received a positive opinion from the FSS’s investigators and from the Korean Institute of Certified Public Accountants (KICPA), which the FSS had commissioned, from May to October 2016.”
Shim stressed that the company had no motives to “intentionally” alter its accounting books. “Since this is not the final decision from the FSS, the company plans to deliberate its position during the remaining procedures fully,” he added.
The official made it clear that, if the final ruling does not favor the company, the company intends to file administrative litigation against the decision.
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