Two weeks after South Korean financial regulators imposed a laundry list of penalties on Samsung BioLogics for alleged accounting missteps related to its Biogen-partnered joint venture, the company has launched a counterattack.
Samsung BioLogics has filed an administrative lawsuit against Korea’s Financial Services Commission (FSC) in the hopes of nullifying several penalties the agency slapped Samsung with on Nov.14, according to several press reports in Korea. The FSC had concluded the company violated accounting rules by omitting information about the joint venture, called Samsung Bioepis, in advance of an initial public offering. The agency imposed a $7 million fine, referred the case to criminal prosecutors and recommended the firing of BioLogics’ chief executive Kim Tae-han.
Trading of Samsung BioLogics shares has been suspended on the Korea Exchange and the company is facing a risk of being delisted. Its lawsuit against the FSC reportedly does not address the criminal probe or the potential delisting.
A spokesperson for Samsung BioLogics did not immediately respond to a request for comment from FiercePharma, but the company told reporters in Korea that the intent of the lawsuit is to prove that its accounting practices are legitimate.
Samsung BioLogics has been threatening to sue Korean financial regulators since May, when allegations against the company first surfaced. The review centered around a 2015 financial report, in which Samsung BioLogics reported that it had swung from years of losses to a sudden profit. It did so after changing the method by which it valued Samsung Bioepis—a change that regulators alleged was not only a violation of accounting rules but also an improper method for inflating the company's net profit before going public.
Samsung BioLogics, an affiliate of tech giant Samsung Electronics, has said that the change in valuation method was approved by KPMG Korea, Deloitte Korea and PricewaterhouseCoopers Korea. The FSC also punished those auditors, fining KPMG and barring it from auditing the company for five years, and banning Deloitte from working for the company for three years.
Prior to the legal brouhaha, Samsung BioLogics was on a fast growth path. Its 2017 sales grew a whopping 56% year over year to $420 million, thanks to improved production volume at its manufacturing facilities. Samsung was so excited about the future growth potential of biologics that it said in August it would include biopharma in its plans to invest $22 billion in high-growth business lines.
As for Biogen, it has maintained a bullish outlook for its Samsung joint venture. In June, the company said it would deploy $700 million towards building a 49.9% stake in Bioepis. Samsung and Biogen just launched a biosimilar version of AbbVie’s bestselling drug Humira in Europe, and the two have big plans for expanding Bioepis’ presence in biosimilars going forward.
During Biogen’s third-quarter earnings call in October, R&D chief Michael Ehlers said the company’s biosimilars business could “potentially double over the next couple of years based on … a relationship with Bioepis to add more compounds. So we believe that this is a good growth opportunity for us and we're quite excited about the future.”