Jin Young-tae and Kim Hyo-jin
Shares of South Korea’s leading biosimilar maker Celltrion Inc. and its sales arm Celltrion Healthcare Co. plunged Tuesday on news that Celltrion Healthcare is under regulatory probe for allegedly inflating its revenue through inter-affiliate trading.
According to industry sources, the Financial Supervisory Service (FSS) launched an investigation into Celltrion Healthcare on allegations that it has sold its local distribution rights to affiliate Celltrion to claim the 21.8 billion won ($19.3 million) payment as revenue for the purpose of concealing its operating losses in the second quarter.
Shares of both stocks dropped on the news. Celltrion shares finished Tuesday 10 percent lower at 222,000 won and Celltrion Heathcare 12 percent lower at 71,600 won.
In the late 2000s, Celltrion Healthcare obtained the exclusive selling rights to Celltrion drugs and has since been in charge of sales and marketing while Celltrion focused on manufacturing and development.
But in the second quarter of this year, Celltrion Healthcare sold the rights back to their original owner in return for 21.8 billion won and recognized the amount as its own revenue.
Without the one-off sale, the company would have fallen into the red, raising suspicions of accounting irregularities. Its consolidated operating profit in the April-June period was 15.2 billion won, down 66.5 percent from a year earlier.
Celltrion Healthcare in a statement on Tuesday denied any wrongdoing, claiming “its accounting process for the sale of its distribution rights was in line with accounting standards.”
Celltrion Healthcare has the largest market cap on the junior Kosdaq market with a value of over 10 trillion won. Celltrion, with a market cap of more than 27 trillion won, is the third-largest stock on Korea’s benchmark Kospi after Samsung Electronics Co. and SK Hynix Inc.