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Top Court’s Ruling Deals a Harsh Blow to Staggering Samsung BioLogics
A Company on the Edge of Precipice
Top Court’s Ruling Deals a Harsh Blow to Staggering Samsung BioLogics
  • By Choi Moon-hee
  • August 30, 2019, 10:18
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The Supreme Court's ruling against Samsung Group heir Lee Jae-yong has dealt a harsh blow to Samsung BioLogics.

As South Korea’s top Court ruled on Aug. 29 that Samsung Electronics vice chairman Lee Jae-yong gave a bribe to a friend of former President Park Geun-hye to secure managerial control of Samsung Group, the possibility of the Samsung Group heir being imprisoned got much higher. This pushes Samsung BioLogics, which has already been under prosecutors' probes over its alleged accounting irregularities, further to the brink of a precipice. The global competitiveness of Samsung BioLogics is expected to weaken as it will face more difficulties in winning new orders.

Tthe prosecution's prolonged investigation has already started to disrupt Samsung BioLogics’ business plans. Its third plant, which is the world's single largest biopharmaceutical manufacturing facility, was completed at the end of last year and started test production. However, industry watchers say that it is operating only at a 30 percent capacity.

Market experts say Samsung BioLogics may have difficulties in receiving new orders as the company’s key executives, including CEO Kim Tae-han, have been limiting their outside activities due to a string of investigations for accounting fraud. The industry believes that Samsung BioLogics has obtained only a single digit number of new orders this year. In short, the company cannot but leave its third plant that was designed to produce advanced biomedicines idle in the worst case scenario.

Samsung BioLogics is highly likely to face setbacks in its future strategy plans, including the construction of the fourth plant with a total area of 100,000 pyeong. Given the current situation that global CMO companies are focusing on expansion of their production plants to achieve the economies of scale, there is growing concern that Samsung BioLogics will eventually lose its competitive edge missing “Golden Time.” Celltrion which has been considered one of the K-Bio leaders along with Samsung BioLogics has presented its blueprint to make a 40 trillion won (US$32.98 billion) until 2030, continuously making an aggressive move.

Samsung BioLogics’ earnings are also on a downturn. The company posted sales of 78.10 billion won (US$64.39 million), an operating loss of 15.40 billion won (US$12.70 billion) and a net loss of 13.40 billion won (US$11.05 million) in the second quarter, recording a loss for two quarters in a row this year. Its sales showed a whopping 40 percent decrease compared to the previous quarter, while its operating profit and net profit had a bigger drop than the previous estimates by securities firms.

If even the absence of management from the imprisonment of Lee becomes reality in the future, Samsung BioLogics is expected to face the greatest challenge. Lee is regarded as the driving force behind the accomplishment of new contracts as he has been meeting heads of global leading biopharmaceutical companies in person since the inception of the foundation. The industry thinks that Lee’s global networks are the deciding factor to help Samsung BioLogics which was just an unknown bio firm at the time to join hands with Roche, BMS and Sun Phama.