As Samsung BioLogics has decided to jointly manage Samsung Bioepis with U.S.-based Biogen, all eyes are on how the decision will affect the financial authorities ruling on Samsung BioLogics’ allerged accounting fraud.
Samsung BioLogics said in a regulatory filing on Nov. 6 that it will complete the transfer of shares in Samsung Bioepis to Biogen on Oct. 7. With the completion of Biogen's exercise of its call option, Samsung BioLogics and Biogen will now jointly manage Samsung Bioepis.
Samsung BioLogics will transfer 9,226,068 shares of Samsung Bioepis to Biogen, and Biogen will pay Samsung BioLogics about 795.5 billion won (US$675.41 million), which includes the share price and the interest on the acquired shares. Accordingly, Samsung BioLogics will remove 2.25 trillion won (US$2 billion) worth of assets and 1.93 trillion won (US$1.72 billion) worth of derivative liabilities from its current financial statement. Also, in the fourth quarter of this year, it will post non-operating income of about 414.3 billion won (US$392.44 million), which it acquired from the stake transfer.
With Biogen’s call option payment, Samsung BioLogics’ cash and cash equivalents assets will increase from 477.9 billion won as of end-June to 1.24 trillion won (US$1.1 billion). The firm’s debt ratio will also be reduced from 94.6 percent to 42.6 percent.
Biogen is a multinational pharmaceutical company that jointly established biosimilar developer Samsung Bioepis with Samsung BioLogics. Samsung Bioepis was founded in February 2012 as an 85:15 joint venture between Samsung BioLogics and Biogen, with Biogen possessing the right to a call option to raise its stake to 50 percent minus one share, effective until June 2018. On June 29, 2018, Biogen exercised its call option to raise its stake in the joint venture company.
With the exercise of the call option and the completion of the transfer of shares, the stake of Samsung BioLogics in Samsung Bioepis will decrease to 50 percent plus one share, or 50.1 percent and that of Biogen will increase to 50 percent minus one share, or 49.9 percent. As a result, Samsung Bioepis will operate under a six-person board consisting of an equal number of directors from both Samsung BioLogics and Biogen.
The Securities and Futures Commission (SFC), the auditing arm of the Financial Services Commission, will hold another meeting on Nov. 14 to discuss the findings of the Finanical Supervisory Service from its re-audit of Samsung BioLogics’ accounting practices.
The latest development wouldn’t hurt Samsung for now as Biogen's call option exercise will back up Samsung BioLogics’ claims that it has changed the status of Samsung Bioepis from a subsidiary to an affiliate due to a high possibility of Biogen exercising the call option.
On the other hand, some say that it will not have a big impact since it is already a known fact and what matters is the propriety of Samsung's accounting approach. An official from the accounting industry said, “It is already a known fact so it will not have much effect on the decision of the SFC.”