Pharmaceutical company Genencell, which lobbied for a COVID-19 new drug through Minister of Justice nominee Kim Seung-won, was reported to have halted its clinical trial when a prosecution investigation began. During this process, Genencell reportedly failed to properly pay the settlement to the company contracted for the clinical trial, leading to a lawsuit.
According to legal sources on the 4th, the Civil Division 15-1 of the Seoul High Court is hearing the appeal in a lawsuit filed by Contract Research Organization A against Genencell for payment of service fees related to a clinical trial.
In Feb. 2024, A filed a lawsuit claiming that Genencell failed to properly pay approximately 2.8 billion won in clinical service fees.
In the first instance, the Civil Division 20 of the Seoul Central District Court ruled in Sept. last year that Genencell should pay a little over 400 million won of that amount, partially siding with the plaintiff. Genencell appealed, and the case moved to the second instance.
According to the ruling and related documents, Genencell signed a research service contract with A in Jan. 2021 to outsource a clinical trial to develop a COVID-19 new drug. Genencell was reported to have applied to the Ministery of Food and Drug Safety for a clinical trial plan in Sept. that year.
During this process, Kang, the founder of Genencell, was found to have asked through broker Yang to help expedite clinical approval at the Ministery of Food and Drug Safety. Yang asked nominee Kim, and Kim was reported to have asked then-Commissioner Kim Gang-lip to take good care of the matter. Genencell received approval for the clinical trial from the Ministery of Food and Drug Safety in Oct. 2021.
In the process, Genencell expanded the number of clinical trial subjects for the COVID-19 new drug from 300 to 414, and then to 424. The contract amount for service fees with A also increased from 9.9 billion won to 12 billion won and then to 12.8 billion won.
At the time, Genencell agreed to pay the service fees in several installments and paid A 3.6 billion won from January to November that year. A then recruited 109 clinical trial subjects from May to December 2022, the following year. The number who actually participated in the trial was 100. In the process, Genencell also separately commissioned a 780 million won research service through A and a hospital in Seoul.
However, in Feb. 2023, Genencell abruptly requested a suspension of the trial. Genencell sent an email to A stating, "Please suspend the clinical procedures. A prosecution investigation is currently underway, and there are difficulties in the flow of funds." Genencell added, "There is a high possibility that unforeseen problems may arise in paying additional expense or during the prosecution's investigation, so we ask for your understanding," and said, "Externally, this is a temporary suspension, not abandonment of the trial, so please take that into consideration." In May that year, it sent an official letter requesting suspension of the trial.
Genencell and A were reported to have differed over the clinical settlement amount. A maintained that it proceeded as far as patient recruitment but Genencell did not properly pay the amount. In June that year, A applied to the Seongnam Branch of the Suwon District Court for a provisional attachment of deposits receivables against Genencell. When the court ordered the attachment, Genencell filed an objection, and in Jan. 2024 the court sanctioned the provisional attachment.
A later filed a lawsuit seeking payment of approximately 2.8 billion won in service fees from Genencell, and the first instance ruled partially in favor of the plaintiff. The court found that "as the COVID-19 fatality rate declined at the time, Genencell determined it would be difficult to obtain good results in efficacy assessment even if the trial continued." Genencell appealed, and the second instance is now underway.
During this process, Kang was reported to have attempted to transfer 5 million won to nominee Kim's campaign donation account. Prosecutors found that the transfer did not go through because the donation cap had been reached. Kim received a deferred prosecution disposition from prosecutors. Deferred prosecution means the charges are acknowledged but the filing of an indictment is postponed. On this day, nominee Kim's confirmation preparation team said, "We merely conveyed a grievance petition to the Ministery of Food and Drug Safety," adding, "We did not demand approval for the treatment and did not intervene in the review process."
Separately, Kang was found to have applied for clinical approval from the Ministery of Food and Drug Safety after deleting cases of adverse effects from animal testing. The Seoul Western District Court in Dec. 2024 sentenced Kang to three years in prison, suspended for five years, on charges including obtaining approval for a clinical trial with false data.