Invossa scandal may snowball from here

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Invossa scandal may snowball from here

After revoking the license for Invossa, authorities are now focused on the scandal behind the scandal: What the company knew and when it knew it.

The consequences are potentially catastrophic. Kolon TissueGene could be delisted from the Korea Exchange, and the parent company’s executives are facing possible criminal prosecution.

It all comes down to an email.

According to Kang Seok-yeon, the chief of the Ministry of Food and Drug Safety’s biopharmaceutical policy division, Kolon Life Science received an email from Kolon TissueGene, its U.S. subsidiary, on July 13, 2017.

The message conveyed test results showing that kidney cells were present in Invossa.

The gene therapy drug, which is used to treat knee osteoarthritis, was granted approval for commercialization on the basis that it used cartilage-originated basis cells, not kidney cells.

Company executives claim that they had no idea the kidney cells were present in the drug. They only revealed the presence of the cells in early 2019. If they received and read the email, it would mean that they had been hiding the problem for at least two years.

Officials are focused on verifying whether the CEO of Kolon Life Science, who is also the CEO of Kolon TissueGene, was aware of the presence of the kidney cells.

“Given that Kolon Life Science received the email at that time, it already knew the drug contained kidney cells,” Kang said Tuesday, adding the ministry would file a criminal complaint against Kolon Life Science and its executives, including Kolon Life Science CEO Lee Woo-suk.

With the global population continuing to age, Kolon Corporation had expected gene therapy to be a game changer in the degenerative joint disease market.

Boston-based L.E.K. Consulting earlier estimated that Invossa sales could reach as much as $5.5 billion a year in the United States alone.

Some even nicknamed Invossa as the “fourth child” of former Kolon Group Chairman Lee Woong-yeul, who stepped down from all leadership positions at the conglomerate earlier this year.

During his time at Kolon Corporation, Lee Woong-yeul pushed for the expansion of the group’s portfolio. His efforts were directed at life sciences and Kolon Life Science’s Invossa, as he sought to dramatically shift the mix of what was primarily a manufacturing company.

Lee Woong-yeul currently owns 45.83 percent of Kolon Group, which itself owns 20.35 percent of Kolon Life Science and 27.26 percent of Kolon TissueGene.

The former Kolon Group chairman is also the second-largest shareholder of Kolon TissueGene, with 17.8 percent. He also owns 12.55 percent of Kolon Life Science.

Kolon Life Science said Tuesday that it never attempted to manipulate or hide test results.

The Korea Exchange is reviewing whether to delist Kolon TissueGene.

Shares of Kolon Life Science and Kolon TissueGene were suspended from 10:35 a.m. Tuesday. On Wednesday, the suspension of Kolon Life Science was lifted, but Kolon TissueGene remained suspended.

The Korea Exchange said that shares of Kolon TissueGene will remain suspended until a decision is made on possible delisting. It has been only a year and a half since Kolon TissueGene listed its shares on the Kosdaq.

Since the scandal began, Kolon Life Science’s share price has dropped about 73 percent from its peak of 93,500 won ($78) on March 14 to 25,500 won just before the suspension. The share price again dropped 21.57 percent Wednesday after the suspension was lifted.

The share price of Kolon TissueGene has fallen more than 80 percent from its March 5 peak of 42,850 won.

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