BioLogics isn’t out of the woods

The Financial Services Commission (FSC)’s final ruling on Samsung BioLogics’ accounting scandal sidestepped a central question at the heart of the controversy.

It never determined whether BioLogics deliberately changed the status of Samsung Bioepis from a subsidiary to an affiliate in order to inflate its valuation, as the Financial Supervisory Service (FSS) claimed.

Still, analysts believe that the regulator’s move lowered the possibility of Samsung BioLogics being delisted, though uncertainties remain.

In its latest decision on July 12, the FSC’s Securities and Futures Commission asked the FSS to review the Bioepis issue again. The commission handed out penalties on a separate but related case on information that was missing from BioLogics’ audit report between 2012 and 2014.

“We concluded that Samsung BioLogics intentionally omitted information that should be publicly disclosed, which clearly violates accounting standards,” said Kim Yong-beom, vice chairman of the FSC.

Samsung’s bio unit didn’t disclose until 2015 the fact that Biogen, a US biotech firm, holds a call option on Samsung Bioepis. This prompted the FSC to demand the removal of executives involved and take the case to the prosecution.

“As for the FSS’ speculation that BioLogics unfairly converted Bioepis into an affiliate, the decision lacked clarity and concrete evidence,” Kim said.

The FSS said that it will respect the commission’s decision and soon begin a new review session into its previous ruling on BioLogics.

“A specific schedule has not been decided, but we will take steps to follow the FSC’s ruling,” said a source at the FSS.

Since the vice chairman did not refer BioLogics to a screening for possible market delisting, analysts say that the company avoided the worst-case scenario.

“The possibility of Samsung BioLogics being delisted is limited based on the previous cases and rulings,” said Jin Hong-gook, an analyst at Korea Investment & Securities. “If this led to delisting, the impact on the bio sector and Korea’s stock markets will be huge, which will further devalue the country’s stocks,” Jin said.

The FSC ruling helped the share price of BioLogics rebound after the accounting scandal wiped out more than 10 trillion won ($8.8 billion) of its value in May.

BioLogics’ shares increased for two consecutive days, and gained 0.73 percent on Tuesday to close at 413,000 won. Many analysts, however, say that the uncertainties surrounding the company’s accounting practices have not yet been resolved.

“The schedule for the next auditing procedure has yet to be decided, so the uncertainties have not been cleared up and will likely linger in the long term,” Jin added. “The future review sessions will likely continue to focus on the circumstances surrounding Samsung Bioepis, which was categorized as an affiliate in 2015.”

Kim Joon-sop, an analyst at KB Securities, expressed a similar view.

“The commission’s announcement won’t affect the net profit or market capitalization of Samsung BioLogics,” Kim said. “But its accounting will continue to face scrutiny in the future.”

The FSC refrained from imposing fines, but all trading of Samsung BioLogics shares was suspended last week between the market’s close on Thursday and 9 a.m. on Friday.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]