Shares of 3 Celltrion companies plunge on accounting scrutiny by regulator

2021.11.23 15:05:54

[Photo by MK DB]이미지 확대

[Photo by MK DB]

Shares of three Celltrion Group companies – Celltrion, Celltrion Healthcare and Celltrion Pharm –tumbled more than 5 percent Tuesday upon news that the second largest biotech group in terms of market cap in Korea is under scrutiny by financial authorities on its accounting practices three years ago.

The setback comes amid selloff in Celltrion companies following the rise of oral Covid-19 medications as game changers over Celltrion’s intravenous formulation that requires hospital stay.

A local newspaper reported that the accounting oversight board under the Financial Services Commission recently launched review into allegations of the group’s window dressing to make financial statements look better.

The allegations of accounting fraud raised by some shareholders in the past stemmed from Celltrion Group`s unique business structure, where Celltrion Healthcare purchases biosimilars from Celltrion and sells them to overseas retailers. They suspect profits could be inflated or false sales could be generated during this intra-affiliate trading. Celltrion Healthcare, which owns overseas distribution rights to Celltrion products, has held inventory of over 1 trillion won ($841 million) since 2014.

The FSC has yet to prove that Celltrion Group`s sales themselves were false but found circumstantial evidence of reduced inventory losses in the books from Celltrion Healthcare and Celltrion Pharm.

Although the market value of medicines stored in warehouses fell, the resulting costs might not have been reflected in earnings in a timely manner to post better income.

The FSC admitted its accounting oversight is underway but denied truth in some of the media claims.

By Minu Kim

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