More trouble for Samsung BioLogics: Prosecutors raid Korea Exchange in IPO probe

Samsung Biologics
Samsung BioLogics has faced scrutiny for nearly a year for its accounting on a biosimilars joint venture with Biogen, called Samsung Bioepis. (Samsung BioLogics)

Samsung BioLogics has faced accounting scrutiny for nearly a year on its biosimilars joint venture with Biogen, and now the investigation has taken a new turn. South Korea prosecutors raided Korea Exchange offices on Friday, looking for information about the company’s 2016 initial public offering, Nikkei reports

At issue is whether the exchange gave Samsung BioLogics special treatment for its listing, according to the news service. Kim Eun-Jeong, a manager with South Korea’s People's Solidarity for Participatory Democracy, told Nikkei Samsung BioLogics could only list after the exchange changed its rules to allow loss-making companies.  

Authorities collected documents and computer hard drives in the raid, Nikkei reports. 

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The Korea Exchange investigation isn’t the first probe into Samsung BioLogics. The contract drug manufacturer has been under the microscope since last year over its accounting for a biosimilars joint venture with Biogen. Samsung’s accounting for the deal allowed its finances to swing from a loss to a profit shortly before an initial public offering, authorities have said.

In November, stock regulators ruled that the company intentionally violated rules to inflate its value. Officials halted trading in the company, issued an 8 billion Korean won ($7.1 million) fine, recommended dismissal of CEO Tae-han Kim, Ph.D., and referred the case to prosecutors. The trading suspension was lifted in December after the exchange ruled that the company’s shares could remain listed while the case played out.

RELATED: Court cuts Samsung BioLogics a break during probe of its accounting for Biogen deal

Weeks later, a Korean court ruled that the allegations were unproven and “could lead to irreparable damage” for the company, an official told Reuters. The court paused the other punishments.

Now, Kim Eun-Jeong told Nikkei that prosecutors could also be scrutinizing the decision to allow shares to resume trading.  

Despite all the scrutiny, Samsung BioLogics has been pressing ahead with big ambitions; last year, the company grew revenues 15.3% to KRW 535.8 billion ($482 million). 

RELATED: Samsung BioLogics sees sales rise but profit fall as it continues expansion

Samsung BioLogics established its CDMO and biosim outfit after parent company Samsung decided it was a worthy diversification move away from its existing chemicals business. The company has pledged to become the top biologics contract manufacturer in the world. In seven years, it's established three biologics manufacturing facilities in Incheon, South Korea.

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