I even went to the president and the prime minister… Seegene’s sales and net profits-JoongAng Ilbo

[뉴스분석] Why was Seegene being advised of dismissal or suspension of work?

– Seegene, which was attracting attention from the market like this, climbed on the cutting board with an opaque accounting process. On the 8th, the Securities and Futures Committee of the Financial Services Commission imposed severe disciplinary action, such as recommending the dismissal of the executive in charge and imposing a fine. Seegene said, “It was a practice,” and is in a position to comply with the regulations in the future.

① Billions of net profit fluctuate like a rubber band

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Prime Minister Jeong Sye-gyun (center) visits the Seegene Medical Foundation Molecular Diagnostic Center in Seongdong-gu, Seoul on the afternoon of January 6 and listens to an explanation from Seegene officials. [연합뉴스]

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Seegene sold these two types of products at 7 overseas subsidiaries and 60 agencies. However, when the agency ordered the diagnostic reagent, the financial authorities found that Seegene randomly left more than the order. The Jeung Seon Committee said, “The excess quantity exceeding the actual order quantity from 2011 to 2019 was voluntarily taken out to the agency, and all of this was recognized as sales, and sales, cost of sale, and assets were over or underestimated.”

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On the afternoon of January 6th, a Seegene researcher is conducting analysis and testing for Corona 19 at Seegene Molecular Diagnostic Center in Seongdong-gu, Seoul. [뉴스1]

– Seegene’s side refuted, “It happened while accepting returns to protect the trust and the agency.” According to Seegen, there was no condition that’returns are possible’ in the contract signed by Seegen with an agency that supplies molecular diagnostic reagent products.

However, when Seegene released a new product with improved performance over the existing product, it replaced the old product sold to the agency with a new product. Seegene claims that “the financial bureau saw the sales related to the product for which there was such a return transaction as a violation of accounting regulations.”

As a result of a survey by the financial authorities, the net profit inflated in this way was 1.457 billion won as of 2011. This amount was reduced to 847 million won (2012), and increased to 14,72 billion won in 2015.

Regarding the reason why the net profit fluctuated like a rubber band, Seegene said, “At the time, there was a case where a retailer who did not fully understand molecular diagnostic products purchased a large quantity of products and then returned them and requested a refund.” “In the refund process, the amount previously set as sales This decreased, and as sales decreased, net profit and retained earnings decreased, and the amount was corrected.”

② 17 billion’costs’ are treated as’assets’

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Minister of Science and Technology Information and Communication Choi Ki-young (left) visited SeeGen, a manufacturer of Corona 19 diagnostic reagents located in Songpa-gu, Seoul last year and listened to explanations at a research facility. [사진 과학기술정보통신부]

– Money invested for research purposes while developing technology can be accounted for as’cost’ or as’asset’. In common sense, it seems natural that money spent in the process of research and development (R&D) is treated as an expense. However, if the research in which this money was invested is likely to be successful, it may be considered that it has acquired intangible assets. When a manufacturing company pays a cost and acquires a tangible asset such as a machine, it is the same as taking it as an accounting asset.

However, pharmaceutical and bio companies have standards when considering R&D expenses as assets. According to the’supervising guidelines for accounting for R&D expenses of pharmaceutical and bio companies’, it can be treated as an asset after phase 3 clinical trials have been conducted.

However, Seegene treated the amount spent in the process of developing diagnostic reagents as’asset’. The total R&D cost in question is 17 billion won (2011-2017).

Regarding this, Seegene said, “In the process of developing products such as diagnostic reagents, bio companies do not proceed with phase 3 clinical trials unlike pharmaceutical companies.” “This is a problem that occurred when the pharmaceutical industry and the bio industry were grouped into one category, but In order to comply, we will treat future development costs as’costs’.”

③ Change debt classification and pretend to be’cash rich’

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At Seegene Medical Foundation in Seongdong-gu, Seoul, a number of Seegene researchers are conducting analysis and testing for Corona 19. [뉴스1]

– An entity can issue convertible bonds (CBs) as a way to raise funds. Seegen also issued 5-year bonds that can be converted into stocks. However, it was classified as illiquid.

If the payment deadline exceeds one year, it is accounted for as’non-current liabilities’, and if repayment is required within one year, it is accounted for as’current liabilities’. The problem is that Seegene had a condition that the 5-year-maturity CB, which was generated by Seegene, could be claimed for early repayment within one year. CBs with these conditions must be classified as current liabilities.

However, Seegene treated CB as non-current liabilities, pretending that the company’s cash flow was greater than it actually was. Since 2014, the misclassified amount totaled 1144 billion won.

Regarding this, Seegene explained, “It is a simple error caused by a lack of systems and manpower in the management part, which was relatively weak,” and “We have revised our financial statements by reflecting all these points in the third quarter of 2019.”

Reporter Moon Hee-cheol [email protected]



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