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| Celltrion Chairman Seo Jung-jin |
Celltrion Healthcare, a marketing company that holds an exclusive sales right on products made by its bio company affiliate Celltrion, is under investigation over suspected accounting fraud, sparking concerns that bio heavyweights listed on the local bourse will be subject to greater investigative scrutiny.
The investigation comes shortly after Samsung BioLogics, a pharmaceutical arm of the Samsung Group, had its stock trading resumed Tuesday, a month after the Financial Services Commission (FSC) concluded that it engaged in accounting fraud in 2015.
The Financial Supervisory Service (FSS) is looking into Celltrion Healthcare over suspicion that it committed accounting fraud in the amount of 21.8 billion won ($193 million) in a deliberate attempt to understate operating loss in the second quarter of 2018, a much needed "performance-booster" that saved the firm from seeing its business go in the red.
According to financial statements, Celltrion Healthcare saw its sales of 15.2 billion won in the April-June period in 2018, a 66.5 percent drop from the previous year.
But the figure would have been far worse had it not been for the "help" from its affiliate in making the 21.8 billion won sales, a reason FSS finds unethical given the disputable nature of whether the sales right can be recorded as performance.
FSS is of the stance that intangible assets including sales rights and research and development costs should not be recognized as performance and therefore should be excluded accordingly from accounting bookkeeping.
Following this, the financial regulator is set to take a closer look starting 2019 into bookkeeping irregularities based on such arbitrary interpretation of what can be recognized as sales or not.
It will put businesses under the microscope to see where they have overstated or understated profit or losses in what could be considered a white-collar crime.
Celtrion Healthcare issued a statement saying the transaction was a legitimate part of corporate accounting.
"We consider profits made from exercising an exclusive sales right we hold as sales. Such sales activities are also in compliance with International Financial Reporting Standards," it said.
"We have inked a deal this year under which we gave our exclusive sales rights following an approval of the company board. This was part of our strategy to focus our resources in the overseas market given the limited customer base in the domestic market, an assessment shared with Celltrion in our numerous discussions over the past few months."
On the news, Celltrion Healthcare with the largest market capitalization on KOSDAQ of about 10 trillion won, closed at 71,600 won Tuesday, down over 1 percent or 9,800 won from the previous close.
Celltrion with the third-largest market capitalization on KOSPI plunged by 24,500 won to close at 220,000 won on the same day.
