Biogen Increases Ownership in Samsung Bioepis

Biogen

Cambridge, Massachusetts-based Biogen exercised its option to acquire additional shares of Samsung Bioepis, a joint venture with Samsung Biologics that was founded in 2012.

Under the terms of the deal, Biogen is paying Samsung BioLogics about $700 million for the shares, which will increase Biogen’s ownership in the joint venture from about 5.4 percent to about 49.9 percent.

“We are very pleased with the progress made to date at Samsung Bioepis and believe exercising this option is an opportunity to create meaningful value for our shareholders,” said Michel Vounatsos, Biogen’s chief executive officer, in a statement. “This option allows us to increase our ownership share in a leading biosimilar company at what we believe are attractive terms. We look forward to building an important relationship with Samsung BioLogics.”

In a separate regulatory filing today, Samsung BioLogics indicated that the additional shares Biogen would receive were valued at about $2 billion.

This option suggests that Biogen, a leader in multiple sclerosis and other neurological disorders, is significantly increasing its interest in biosimilars. Biosimilars are like generic drugs, only for biologics. Because they are not direct copycats, but similar to a drug they’re copying, they have to undergo regulatory hurdles similar to that of an original drug.

Samsung Bioepis focuses on biosimilar development. It has six biosimilar candidates, some of which have been approved for use in Korea, Europe, Australia, Canada, and Brazil. They are biosimilars for Amgen’s Enbrel, Johnson & Johnson’s Remicade, AbbVie’s Humira, Sanofi’s Lantus, and Roche/Genentech’s Herceptin and Avastin.

Samsung BioLogics is being investigated by South Korean regulators over bookkeeping issues during 2015. Reuters reports, “Samsung BioLogics shares plunged in early May after the financial watchdog said it had breached accounting rules concerning its valuation of subsidiary Samsung Bioepis in 2015. Samsung BioLogics’ valuation of Samsung Bioepis jumped 18 times to about $4.5 billion in 2015 after it switched to valuing the unlisted firm at fair market value instead of book value, a result of it being treated as an affiliate instead of a unit. BioLogics has denied any wrongdoing and said the change was necessary to reflect different accounting standards in the event its partner exercised its call option.”

Samsung BioLogics made the shift in accounting practices before its initial public offering on November 10, 2016. At the end of 2015, Samsun BioLogics had a 91.2 percent stake in Samsung Bioepis. Korea Biomedical Review noted that Samsung BioLogics turned a profit after it changed Samsung Bioepis from book value, or acquisition value, to market value, also called fair value. The FSS investigation is based on this not following proper accounting rules.

South Korea’s Financial Services Commission (FSC) will take Biogen’s actions today into consideration, Reuters was told by regulatory sources.

“We turned our subsidiary Samsung Bioepis into an affiliate firm as it became more feasible for Biogen, our joint venture partner, to exercise its call option as the results of Samsung Bioepis’ development of its first biosimilar product,” said Shim Byung-hwa, Samsung BioLogics business innovation team leader, in a news conference.

Under the new arrangement, Samsung Bioepis will be a fully realized jointly managed company, with both having equal seats on its board of directors. “The two companies will actively cooperate with each other to ensure the takeoff of Samsung’s biosimilar business in the global market,” said Samsung BioLogics’ chief executive officer, Kim Tae-han, in a statement.

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