Stock trading of Samsung BioLogics Co. came to a halt on Wednesday immediately after the company was found to have intentionally breached accounting rules, but it won’t likely end up being delisted, the country’s top financial regulator said.

After months of investigations, the Securities and Futures Commission, the top decision-making board of the Financial Services Commission (FSC), found the contract drugmaker guilty of breaching accounting standards by unfairly inflating its profits before going public.

Upon the ruling, trading of BioLogics shares has been suspended for at least 15 business days while the stock exchange operator reviews the case to determine whether to expel the stock.

Kim Yong-beom, vice chairman of the FSC, downplayed the chances of a complete delisting. “There have been 16 companies subject to a listing qualification review since the policy came into effect in 2009 and so far, no company has been removed from the bourse due to accounting irregularities,” he said.

Analysts also believe the chances of delisting are low considering the bio heavyweight’s presence in Korea’s stock market. It is the sixth largest stock on the main Kospi bourse, with a market value of about 22.1 trillion won ($19.5 billion). About 75 percent of BioLogics is owned by Samsung Electronics Co. and Samsung C&T Corp. Individual shareholders hold a combined 21.5 percent stake, with foreigners owning 9 percent.

The financial regulators have referred the case to prosecution and ordered the dismissal of the CEO.

Samsung BioLogics has denied the charges and said it would file an administrative lawsuit against the authorities to clear its name.

Samsung BioLogics was founded in 2011 and marked the Samsung conglomerate’s ambitious push into pharmaceuticals, which it viewed as a key growth driver. The company has grown into one of the world’s largest contract drug manufacturers, making complex biologic drugs for global pharmaceutical companies.

It enjoyed sky-high shares until financial regulators in May re-launched a probe into allegations of accounting fraud. Critics argued that BioLogics switched the valuation method of its stake in Samsung Bioepis, a joint venture with a U.S. drugmaker, to deliberately inflate its profit in 2015 before going public the next year. Valuation of Bioepis jumped 18 times after it switched the valuing to fair market value from book value, resulting in a sudden swing to profit for BioLogics after years of losses.

Samsung BioLogics said the accounting change was made after Biogen, its U.S. partner, decided to exercise its call option to boost its stake in the joint venture.

But the regulators argued that the company should have recognized the call option in the joint venture deal in 2012, which was not the case.

By Moon Il-ho and Kim Hyo-jin

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]