Resolving Uncertainty... The Soaring Celtrion Trio

[Asia Economy Reporter Ji Yeon-jin] Celltrion and its affiliates surged simultaneously as uncertainties related to accounting fraud were resolved after four years.

According to the Korea Exchange on the 14th, Celltrion opened 6.07% higher than the previous trading day and continued its upward trend. Celltrion Healthcare and Celltrion Pharm also surged more than 7% respectively and maintained their gains. Although financial authorities confirmed violations of accounting standards related to Celltrion's accounting fraud allegations, they did not recognize intentional wrongdoing, avoiding the extreme measure of 'trading suspension,' which appears to have stimulated investor sentiment.

Earlier, on the 11th, the Securities and Futures Commission held an extraordinary meeting and imposed measures such as fines, auditor designation, recommendations for internal control improvements, and corrective demands on the three Celltrion companies for violations of accounting standards. The commission stated that the three Celltrion companies overestimated development costs or failed to reflect inventory asset valuation losses of subsidiaries. They also confirmed violations of accounting standards such as omitting transactions with related parties in the notes, excessively recognizing sales, or misclassifying gains from domestic sales rights as revenue. However, the commission judged that these were not intentional accounting fraud. Therefore, the prosecution referral requested by the Financial Supervisory Service was not approved, and it did not constitute grounds for the Korea Exchange’s listing eligibility review (trading suspension).

The three Celltrion companies had seen their corporate value plummet amid concerns that financial authorities would recognize intentional accounting fraud and that trading might be halted due to prosecution referral. In Celltrion’s case, the stock price, which soared to 320,000 KRW after the successful development news of a COVID-19 treatment, fell more than 55% to 147,000 KRW on January 27 this year. Celltrion Healthcare and Celltrion Pharm also saw their stock prices halved during this period. Lee Dong-geon, a researcher at Shinhan Financial Investment, said, "Although fines are expected to be imposed, the impact of the accounting standard violations on existing financial statements is limited," adding, "A short-term stock price rise is expected due to the resolution of uncertainties following the long-term audit results announcement." However, he suggested a conservative approach to sales expectations for numerous follow-up biosimilars to be launched this year due to the entry of latecomers and intensified competition, lowering Celltrion’s target stock price slightly by 5,000 KRW to 250,000 KRW.

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