South Korean regulators have alleged that Samsung BioLogics committed a crime by failing to disclose an agreement with Biogen over their biosimilars joint venture, sending their findings to prosecutors for a criminal investigation.
After reviewing the case, South Korea's Securities and Futures Commission found that Samsung BioLogics "violated accounting standards by intentionally omitting information regarding its joint venture agreement with Biogen in its public disclosure." The agency said it's requesting the dismissal of company executives, plus an appointment of external auditors for three years. It's sending the case to prosecutors for a criminal case review.
According to Biogen executives on that company's first-quarter conference call, Biogen had an option to increase its equity state in the Samsung Bioepis joint venture. The biotech exercised that option only weeks ago, spending about $700 million to build its share up to 49.9%, from 5.4%. Biogen and Samsung Bioepis declined to comment on the development.
Samjong KPMG, Samsung BioLogic's auditor, will be restricted from auditing the company for four years under the SFC decision. SFC is reporting the audit firm and accountants to prosecutors as well, according to the agency's statement. KPMG didn't immediately respond to a request for comment.
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Responding to the decision, Samsung BioLogics said it "provided full cooperation" during the audit and that the SFC decision is "very unfortunate despite such efforts."
The Samsung unit said its accounting complied with International Financial Reporting Standards. The company will "put forth its best efforts to prove the legality of its actions to protect the interests of all stakeholders, investors and shareholders, and will even consider filing an administrative lawsuit," according to the statement.
The decision comes after South Korea's Financial Supervisory Service in May determined that Samsung BioLogics broke accounting rules to inflate its profit before going public. At the time, the company's vice president Byunghwa Shim said Samsung BioLogics would consider an administrative lawsuit "if a decision is made that we cannot accept," as quoted by Reuters.
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This time around, regulators have homed in on the company's biosimilars joint venture with Biogen and the agreement allowing Biogen to build its stake.
Samsung BioLogics is a top contract manufacturer and reported $420 million in sales last year. Samsung Bioepis, the biosims joint venture, has significantly grown in perceived market value in recent years as it has secured approvals for biosims to blockbuster drugs, according to Reuters. The group has already won U.S. or European nods for biosims to Amgen's Enbrel, J&J's Remicade and Sanofi's Lantus, and is working on biosims to Roche's Herceptin and Avastin, two bestselling cancer meds.