Seegene 'Sales Inflation' Fallout... Biotech Stocks 'Joint Weakness'

Prime Minister Chung Sye-kyun is listening to an explanation of the specimen reception process for COVID-19 at Seegene Medical Foundation Molecular Diagnostic Center in Seongdong-gu, Seoul, on the 6th. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Ji Yeon-jin] Seegene, a medical device company famous for its COVID-19 diagnostic devices, was caught inflating its sales and has been fined. Following this news, Seegene's stock price showed weakness from the early trading session.

According to the Financial Services Commission on the 9th, the Securities and Futures Commission under its jurisdiction decided at a regular meeting the day before to impose a fine on Seegene, a KOSDAQ-listed company that violated accounting standards, designate an auditor for three years, recommend dismissal of the responsible executive and suspension of duties for six months, and recommend improvements to internal controls. If the fine is 500 million KRW or less, the Securities and Futures Commission decides; if more, the Financial Services Commission decides.

Seegene was investigated for arbitrarily shipping excessive quantities of products exceeding actual order volumes to distributors from 2011 to 2019 and recognizing all of these as sales, thereby overstating or understating sales revenue, cost of sales, and related assets. Additionally, convertible bonds with early redemption conditions within one year were classified as non-current liabilities instead of current liabilities, and research and development expenses related to diagnostic reagents that did not meet asset recognition requirements (technical feasibility) were inflated as development costs, according to the Securities and Futures Commission.

Seegene is a leading Korean company specializing in COVID-19 diagnostic kits. With the spread of COVID-19, sales of diagnostic kits surged, increasing from 122 billion KRW in 2019 to an estimated 1.0761 trillion KRW last year. Operating profit rose from 22.4 billion KRW to an estimated 673.9 billion KRW.

As diagnostic kits gained prominence, the stock price, which was around 30,000 KRW in February last year, soared to the 320,000 KRW range by August, rising more than tenfold in just six months. Recently, after a correction, Seegene's stock price fell to the 170,000 KRW range, with a market capitalization of 4.5112 trillion KRW as of the previous day, ranking fourth on KOSDAQ. As of 9:30 AM on the day, Seegene's stock price dropped 4.94% compared to the previous day.

Celltrion (-0.60%) and the top two KOSDAQ market cap companies, Celltrion Healthcare and Celltrion Pharm, also fell by 0.89% and 1.30%, respectively, on the same day. This is because claims that Seegene's method of inflating sales through distributors is an industry practice have heightened attention on whether accounting audits will be conducted on Celltrion, Korea's largest bio company.

This content was produced with the assistance of AI translation services.