Korea exchange: Celltrion probed as Samsung Bio resumes trading

An investigating has begun into alleged accounting irregularities between Celltrion Inc. and its affiliate Celltrion Healthcare. Meanwhile, Samsung BioLogics has recommenced share trading a month after being hit by its own accountancy problems.

South Korea’s Financial Supervisory Services (FSS) is looking into the business dealings of drugmaker Celltrion Inc and its wholesaler and marketing affiliate Celltrion Healthcare, according to Korean news outlet YTN.

The article claimed Celltrion Healthcare violated accounting rules by selling the domestic distribution rights of biological medicines back to Celltrion Inc. for KRW 21.8 billion ($19 million). The treatment of the money as sales in Celltrion Healthcare’s second quarter financial reporting could be deemed inappropriate under FSS regulations. The firm had reported KRW 15.2 billion in operating profit in the second quarter, including the sale of the rights to Celltrion Inc.

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Celltrion Healthcare denied any wrongdoing.

“Regarding transfer of domestic distribution rights, revenues by transferring the rights can be recognized as sales since Celltrion Healthcare has been creating revenues through utilizing global exclusive sales rights and this accounting complies with K-IFRS [International Financial Reporting Standards],” the firm said in a message to its shareholders.

“Celltrion Healthcare has no account receivables which couldn’t be collected from partners in recent five years. Additionally, no false sales is in place at our account receivables.”

The share price of both firms dropped on Wednesday following the news of the accounting probe.

2016 Accusations

Celltrion Inc – which manufactures a number of biosimilar products including Inflectra (infliximab-dyyb) for its partner Pfizer – has been accused of accounting irregularities with affiliate Celltrion Healthcare in the past.

In 2016, a research report​ accused Celltrion Inc of increasing its revenues by offloading unwanted product to Celltrion Healthcare and claimed the marketing company had been “set up for no other purpose than to allow Celltrion to fabricate sales and hide excessive levels of debt and inventory.”

The anonymous ‘Ghost Raven Research’ group, which published the report added: “The true financial picture is that Celltrion is a tiny company burning tons of cash, with way too much inventory and way too much debt.” And: “Were Celltrion to report accurate financial statements, we believe it would collapse as one of the largest frauds in world history.”

Samsung BioLogics resumes trading

The news comes weeks after Korean financial regulators slammed Samsung BioLogics, a contract development and manufacturing organization (CDMO) located just down the road from Celltrion in Songdo, Incheon, for inflating its value ahead of an initial public offering (IPO) in 2016.

The Securities and Futures Commission (SFC) ruled that Samsung BioLogics intentionally violated accounting rules by changing the accounting treatment of its holdings in Samsung Bioepis in 2015, and suspended trading of Samsung BioLogics’ stocks.

But on December 10, the Korea Exchange lifted the suspension to protect investors, the CDMO said in a letter to shareholders, adding it plans to increase its transparency going forward.

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