Shareholders who suffered losses from the "Invossa (Invossa-K Inj.) scandal" lost again in damages suits against Kolon Life Science and Kolon TissueGene.
According to legal sources on the 28th, the Civil Agreement Division 30 of the Seoul Central District Court (Presiding Judge Kim Seok-beom) ruled on the 22nd that 149 shareholders lost their 3.8 billion won damages suit against Kolon TissueGene. The court also dismissed a 3 billion won damages claim filed by 78 shareholders against Kolon Life Science.
Invossa is a gene therapy for arthritis developed by Kolon Life Science's U.S. subsidiary, Kolon TissueGene. It consists of Solution 1, which contains human chondrocytes, and Solution 2, which contains transfected cells introduced with a chondrocyte growth factor (TGF-β1). In 2017, the Ministery of Food and Drug Safety (Ministery of Food and Drug Safety) approved it as Korea's first gene therapy.
However, it was revealed that the cells used to manufacture Solution 2 were not the approved chondrocytes but kidney-derived cells (GP2-293), known to carry a risk of tumorigenesis, and the Ministery of Food and Drug Safety revoked its approval in July 2019, after which the company's stock price plunged. Shareholders filed suit, saying the company knew the main ingredient of Invossa had changed but made false disclosures and otherwise falsely stated "material matters," causing losses.
Under the Financial Investment Services and Capital Markets Act, if there is a false statement regarding material matters in a business report and a purchaser of securities suffers losses as a result, the party bears liability for damages.
The court found that the securities registration statement disclosed Solution 2, the core component of Invossa, to the effect that it was "allogeneic chondrocytes into which a gene promoting cartilage regeneration was inserted/introduced," and concluded the company did make a false statement about Invossa's main ingredient.
However, it said the point at issue was not a "material matter" under the Financial Investment Services and Capital Markets Act, finding that "as the plaintiffs argue, it cannot be seen as sufficient to mislead the investment decisions of reasonable investors."
It added, "Considering the overall purport of the securities registration statement, it is hard to view it as drafted to induce a mistake regarding Invossa's medical safety through some false statements about the origin or derivation of the key component."
Regarding the Invossa scandal, minority shareholders have filed numerous damages suits on similar grounds, but the courts have been consistently ruling against the plaintiffs.
In December last year, the court ruled against more than 170 affected shareholders in a 6.4 billion won damages suit, and last month it dismissed a 8.6 billion won damages suit filed by more than 500 shareholders. This month as well, it ruled against the plaintiffs in damages claims, including a 19.7 billion won suit filed by 1,082 shareholders.