Generic drug maker Lotus Pharmaceuticals Co (美時化學製藥) yesterday said it has made non-material adjustments to its financial statements for 2016 and 2017 after South Korean regulators found minor accounting errors at its subsidiary there.
The subsidiary, Alvogen Korea Co Ltd, was included in an industry-wide probe by the South Korean Financial Supervisory Service (FSS), following a high-profile case in April last year against alleged accounting violations at Samsung BioLogics Co, the biotechnology arm of the South Korean tech giant.
Lotus Pharmaceuticals has since revised its earnings, resulting in a NT$15 million (US$493,729) decrease in its 2016 net income and a NT$14 million increase in 2017, the local firm said.
Following the adjustments, the company reported a net loss of NT$0.63 per share for 2016, compared with a previous net loss of NT$0.56 per share.
For 2017, the company’s earnings per share inched up from NT$0.03 to NT$0.09.
The company said that the error is rooted in the difference of interpretation on South Korea’s international financial reporting standards principles regarding development costs of the company’s Incremental Modified Drug (IMD) pipeline.
IMD, or more widely known as 505(b)(2), is an alternative US Food and Drug Administration approval pathway designed to allow the approval of a drug that is not new, but still differs in several meaningful aspects.
While the classification of IMD as generic or new drug products remains a debated area among accounting experts, the company said it has accepted the decision of the FSS.
IMD falls between New Drug Application that is seeking approval to introduce a new drug to the market and Abbreviated New Drug Application (ANDA), which aims to gain approval for a generic version of a drug that is already on the market, according to US FDA guidelines.
The FSS in November last year fined Samsung Biologics US$7.04 million and recommended dismissing its chief executive officer for deliberately overstating the value of its affiliate ahead of the unit’s initial public offering that later raised about US$2 billion.
Lotus Pharmaceuticals has reported that sales in the past month rose 0.7 percent annually to NT$529 million, while aggregate sales in the past year rose 1.1 percent annually to NT$6.35 billion.
Higher generic drug demand from Taiwan and overseas helped offset the loss of licensing fee income, while the introduction of its new Lenalidomide chemotherapy to markets in Europe, the Middle East and Asia would help support sales growth this quarter, the industry’s slow season, the company said.
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