Celltrion at center of debate over inter-affiliate trading of domestic market rights

By Lim Chang-won Posted : December 12, 2018, 15:51 Updated : December 12, 2018, 15:51

[Celltrion]



SEOUL -- Celltrion, a pioneer in South Korea's booming biosimilar industry, is at the center of debate over unconfirmed allegations that its affiliate, Celltrion Healthcare, in charge of marketing, sales and distribution has violated accounting rules.

Celltrion Healthcare used to have exclusive rights to sell Celltrion drugs while Celltrion focused on manufacturing and development. This year, Celltrion Healthcare sold its domestic marketing rights back to Celltrion for 21.8 billion won (million 19.4). The proceeds were registered as revenue.

In a statement posted on its website this week, Celltrion Healthcare insisted it had not violated any rules, citing plenty of cash in reserve. "There is no problem in terms of liquidity because our cash assets stand at about 700~800 billion won."

"Since we are generating profits by using our global exclusive franchise rights, the revenue from such activities can be judged as sales in line with corporate accounting standards," Celltrion Healthcare said, adding it has transferred its domestic marketing rights in an effort to simplify its domestic business and focus on overseas markets.

Celltrion has become a leading biotechnology company coveted by foreign and domestic investors with its net profit soaring to 403 billion won in 2017 from 221 billion won a year ago. In 2002, Celltrion was founded by Seo Jung-jin, 62, with its growth following a supply agreement with U.S. pharmaceutical company Bristol-Myers Squibb in 2004.

Celltrion's biosimilars include Herzuma, based on Herceptin developed by Genentech, a subsidiary of Swiss pharmaceutical giant Roche. Remsima is a copy of Janssen Biotech's Remicade treating rheumatoid arthritis and Crohn's disease. Truxima, the first biosimilar to Rituxan (rituximab), treats patients with non-Hodgkin's lymphoma, chronic lymphocytic leukemia and rheumatoid arthritis.

Buoyed by the growing popularity of Celltrion's biosimilar drugs, Seo has unveiled an ambitious project to nurture his company as one of the world's three major biotech firms through active expansion. "We will be reborn as a comprehensive pharmaceutical company," he said in a message to shareholders in March.

In December last year, Celltrion forged a joint venture deal with Tasly, a Chinese pharmaceutical company. Seo has also disclosed his interest in an unnamed Indian company to strengthen his synthetic drug business.

In November, the Food and Drug Administration (FDA) approved Truxima as the first biosimilar to Rituxan (rituximab) manufactured by Genentech, an American biotechnology company. Celltrion's new TEMIXYS tablet, an incrementally modified drug based on Zeffix also won FDA approval. The new tablet competes with Truvada, a medication used to treat and prevent HIV or AIDS.

In December, Remsima SC, a subcutaneous injection of Remsima, applied for approval by the European Medicines Agency. Instead of an intravenous injection that takes more than two hours in hospital, patients can inject Remsima SC into the fat layer beneath the skin at home to enhance patient convenience and access to medical care.

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