Small shareholders who said they suffered losses from the "Invossa" cell and gene therapy debacle lost in the first trial of a damages suit against Kolon Life Science.
In the industry, there is an assessment that Kolon Group has entered a phase of resolving its legal risks, and attention is on whether Invossa can be revived with TG-C's phase 3 success.
The Civil Division 30 of the Seoul Central District Court (presiding judge Kim Seok-beom) on the 18th ruled against 175 small shareholders, including a person surnamed Kim, in a damages suit of about 6.4 billion won against Kolon Life Science.
The panel also dismissed a separate damages suit filed for the same reason by 19 small shareholders. The court found it hard to deem that the change in the main ingredient brought an essential difference in efficacy or harmfulness, and also found it hard to see it as a false statement or omission of a material fact for investment decisions.
In July 2017, Kolon TissueGene, a subsidiary of Kolon Life Science, developed Invossa as Korea's first gene therapy and won approval from the Ministry of Food and Drug Safety (MFDS).
It is a drug composed of a first solution containing human chondrocytes and a second solution consisting of transfected cells containing a gene (TGF-β1) that helps chondrocytes grow well. It was once called a "dream new drug" as it was known to be effective in treating knee conditions with a single administration.
However, while phase 3 clinical trials were underway in the United States, it emerged that Invossa's main ingredient had changed from "cartilage-derived cells" to "fetal kidney-derived cells."
In response, the Ministry of Food and Drug Safety in Mar. 2019 halted sales and in May of that year revoked the product license.
From that point, civil, criminal, and administrative lawsuits emerged in succession against the Kolon Group, including Kolon Life Science and Kolon TissueGene.
This damages suit by small shareholders is one of them. Valued at about 6.4 billion won, it is the largest among civil suits filed individually by multiple shareholders against the company. It is undecided whether the shareholders will appeal.
There was also an interpretation that this ruling could affect the remaining civil cases.
The key cases awaiting rulings now are first-trial damages suits over investment losses filed individually by shareholders of Kolon Life Science and Kolon TissueGene. In the suit disputing the revocation of Invossa's product license between the company and the MFDS, the MFDS won both the first and second trials, and the case is now before the Supreme Court.
Except for the suit over canceling the revocation disposition, rulings related to the Invossa debacle have repeatedly favored the company.
Lee Ung-yeol, honorary chairman of Kolon Group, who was indicted on seven counts, and Lee Woo-seok, former Kolon Life Science CEO who was indicted alongside him, were acquitted in the first trial in Nov. 2024. The court also acquitted Kolon and the corporate entities of Kolon TissueGene and Kolon Life Science.
Two executives, including a managing director surnamed Cho at Kolon Life Science, who were indicted earlier on similar charges and tried first, were acquitted in both the first and second trials. A suit the company filed against the government over the clawback of research funds also ended in the company's favor.
Kolon TissueGene has renamed Invossa "TG-C" and is seeking to enter the U.S. market with a goal of obtaining U.S. Food and Drug Administration (FDA) approval in 2027. The company is conducting a phase 3 trial for TG-C in the United States. Per FDA guidance, it has split 1,000 trial patients into two studies to run the phase 3 program.
A Kolon TissueGene official said, "In July next year, we expect to announce the top-line results for the first study," adding, "results for the second study will follow in sequence, and all phase 3 results are expected to be announced within next year."
Preparations for the product application are already underway. A company official said, "For the product application, we must submit clinical data and manufacturing-related data at once," adding, "contract manufacturing will be handled by Swiss company Lonza."
Lonza is the world's No. 1 company in the contract development and manufacturing organization (CDMO) field for biopharmaceuticals. Working with Lonza is a strategy to prepare for key CMC (chemistry, manufacturing and controls) uncertainties during FDA review.
On top of this, Kolon TissueGene also obtained approval for a U.S. phase 1 plan to expand the indication to the spine (disc) and plans to begin dosing procedures for spinal patients in the second half of next year. The FDA judged that, as with the knee, there were no safety issues in TG-C clinical trials for the spine and approved the indication expansion trial.
A Kolon TissueGene official said, "For spinal osteoarthritis, we plan to pursue commercialization through various methods, including joint development and technology transfer."
Depending on whether TG-C succeeds in phase 3, Kolon TissueGene and Kolon Life Science are expected to face a major turning point in their businesses. Kolon TissueGene holds the rights for the United States and Europe, while Kolon Life Science holds the rights for Korea, Asia, and Africa.
If TG-C wins product approval from the U.S. FDA, Kolon TissueGene will be guaranteed exclusive sales rights for 12 years in the United States after market authorization and 10 years in Europe.
A Kolon TissueGene official said, "During this period, it will be virtually impossible for competitors to enter the market, such as by selling generics, so TG-C is expected to establish itself as the only fundamental therapy in the global osteoarthritis market."
A Kolon Life Science official said, "Clinical trials for regions outside the United States and Europe are conducted by Kolon Life Science, which holds those regional rights, and we are weighing several options, including transferring rights to partners in countries such as Japan and China to carry out trials."