Biogen exercises call option on Bioepis

The saga of Samsung BioLogics continued in dramatic fashion on Thursday, as U.S. company Biogen announced it will exercise its call option on Samsung Bioepis as the Korean government’s investigation into Samsung’s scandal-ridden pharmaceutical arm continues.

Biogen said in a statement on Thursday that it will exercise its call option right to purchase additional shares in Samsung Biologics’ affiliate Samsung Bioepis, which will raise its share to 49.9 percent of the company. Currently the U.S. firm owns a 5.4 percent stake in Samsung Bioepis, while Samsung BioLogics owns the remaining 94.6 percent.

A call option is an agreement that gives a buyer the right, but not obligation, to buy a company’s assets, including stocks, at a given price before a certain date.

Biogen founded Bioepis together with Samsung Biologics in 2012.

“We are very pleased with the progress made to date at Samsung Bioepis and believe exercising this option is an opportunity to create meaningful value for our shareholders,” said Biogen CEO Michel Vounatsos in the statement. “This option allows us to increase our ownership share in a leading biosimilar company at what we believe are attractive terms. We look forward to building an important relationship with Samsung BioLogics.”

Samsung BioLogics will sell 9.23 million shares of the 19.6 million shares it has in Samsung Bioepis, bringing its own stake in Bioepis to 50 percent. Biogen will pay roughly 748.6 billion won ($671 million), with each share worth 50,000 won plus interest, according to Samsung BioLogics. Biogen estimates the deal will cost approximately $700 million, as it will depend on the foreign currency exchange rate.

“Through active cooperation between the two countries, Samsung’s biosimilar business will start expanding in the global market,” said Kim Tae-han, the CEO of Samsung BioLogics.

Samsung Bioepis is a joint venture established in 2012 by Samsung BioLogics and Biogen. The Korean company contributed $255 million and the American company invested $45 million.

With its newly increased stake, Biogen now has equal rights in the management of Samsung Bioepis. The local market is looking with great interest on what impact this move will have ion the ongoing investigation by the Korean government into alleged accounting violations at Samsung BioLogics.

Currently, the Securities and Future Commission under the Financial Services Commission is reviewing the case. It is expected to come to a conclusion next month.

During its audit of Samsung BioLogics in May, the Financial Supervisory Service accused the company of violating accounting regulations to inflate its valuation ahead of the company’s 2.25 trillion won initial public offering in 2016, which was the second-largest ever in Korea.

The FSS said the biopharmaceutical company reported a sudden turnaround after years of losses and a net profit amounting to 1.9 trillion won in 2015. However, the financial oversight agency said it did so by changing the status of Samsung Bioepis from a subsidiary into an affiliate, which allowed a new accounting standard to be applied. This allowed the share value of Samsung Bioepis to spike from 300 billion won to 4.8 trillion won, allowing it to draw a net profit.

Samsung BioLogics’ shares rose by 1.96 percent compared to the previous day to close at 417,000 won.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]