Minority shareholders who were in the second trial against Kolon Life Science, saying they suffered losses from the "Invossa scandal," have withdrawn their appeals in large numbers. The shareholders say they were harmed because the company failed to properly disclose the ingredients of Invossa. They appear to have decided this after a not-guilty verdict in the first trial.
Invossa had its approval and sales canceled in Korea over an ingredient controversy. In the United States, its clinical trial was halted and then resumed, with results set to be announced. Lawsuits entangling minority shareholders and the company over Invossa are also underway. What happened over the past seven years?
On the 30th, according to the pharmaceutical industry and according to legal sources, the number of minority shareholders who filed a damages suit against Kolon Life Science fell by 136, from 175 in the first trial to 39 in the second. The minority shareholders withdrew the lawsuit after losing in the first trial in Dec. last year.
Invossa is an osteoarthritis treatment developed by Kolon TissueGene, an affiliate of Kolon Group. It received approval from the Ministery of Food and Drug Safety in Korea in 2017 and began sales. In 2019, while a separate clinical trial was underway in the United States, it became known that the main ingredient differed from what was reported to the Ministery of Food and Drug Safety, sparking controversy.
During the domestic approval process, the main ingredient was described as cartilage-derived cells, but it turned out to be kidney-derived cells with potential tumorigenicity. The Ministery of Food and Drug Safety canceled the approval, domestic sales were halted, and the stock price plunged.
Kolon Life Science's minority shareholders filed a 6.4 billion won damages suit against the company in June 2019. They argued they suffered losses because the company failed to properly disclose that Invossa's main ingredient was different, even though it knew the fact.
They said, "We bought the company's shares on the premise that Invossa's main ingredient was cartilage cells," and, "It was revealed that the cells were not cartilage cells but kidney-derived cells, and this entails a significant difference in safety and efficacy."
The Civil Agreement Division 30 of the Seoul Central District Court (Presiding Judge Kim Seok-beom), which handled the first trial, ruled for the defendant in Dec. last year. The court said, "Even if the ingredients are different, efficacy or harmfulness does not change." It found that the company did not falsely state or omit important matters affecting investment decisions. Afterward, many shareholders withdrew their suits, and with some shareholders appealing, the case moved to the second trial.
Separately, in July 2019, minority shareholders filed an 8.6 billion won damages suit against Kolon TissueGene and Kolon Life Science, among others. Likewise, on the 15th of this month, the first trial ended with a ruling for the defendant. The court took into account previous rulings surrounding the Invossa scandal. This suit also started with a little over 560 people, but as some plaintiffs withdrew, participation fell to a little over 300.
An industry official said, "At the time of the Invossa scandal, Kolon Life Science transaction was suspended and Kolon TissueGene faced the risk of delisting, sending share prices lower," adding, "Now that Invossa's U.S. clinical trial has resumed and results are about to be announced, some shareholders appear to have judged that there is little practical benefit in maintaining the lawsuit."
The second-trial verdict for Kolon Group Honorary Chairman Lee Woong-yeol and executives and employees, who are accused of manipulating Invossa's ingredients to obtain government approval and sell the product, will come on Feb. 5. They were acquitted in Nov. 2024 by the Criminal Division 24 of the Seoul Central District Court (Presiding Judge Choi Kyung-seo). The first trial found that Kolon did not intentionally misrepresent the ingredients or conceal that they were different. The court at the time said, "We need to think deeply about how legal controls over science should proceed."
Meanwhile, Invossa's U.S. clinical trial was halted in 2019 but resumed the following year after a clarification process. Invossa changed its name to "TG-C," completed patient dosing in phase 3, and is in the data collection stage. Kolon TissueGene plans to announce key clinical results as early as July. If the results are acceptable, the company will proceed with steps such as filing for product approval. The industry is watching to see whether Invossa, once driven to the brink, can make a comeback in the United States.