KRX could decide to delist Kolon TissueGene this week

The fate of Kolon TissueGene could be determined this week as the Korea Exchange is scheduled to decide Wednesday whether to move forward with delisting the company in response to the growing Invossa scandal.

If the exchange rules to delist the biopharmaceutical affiliate of Kolon Group, the 59,400 Kolon TissueGene minor shareholders are expected to suffer around 200 billion won ($169 million) in financial damages.

The minority shareholders hold around 4.51 million shares, or 36.6 percent, of the U.S. based Kolon TissueGene.

If the Korea Exchange decides to move forward with the delisting process, it will spend an additional 20 days finalizing the ruling. The exchange could provide a reparatory period for Kolon TissueGene and have the company’s shares suspended for up to two years.

If it rules to keep Kolon TissueGene listed on the secondary Kosdaq, the company’s shares will resume trading immediately. The authority could also spend an additional 15 days reviewing the case.

The Korea Exchange’s decision could be heavily swayed by what was said at a hearing held by the Ministry of Food and Drug Safety on Tuesday. As a part of the license nullification process, the ministry offered Kolon Life Science a chance to comment on the suspension of Invossa yesterday.

The hearing was reportedly attended by one representative from the Drug Safety Ministry and a Kolon Life Science executive involved in developing the gene therapy drug. Lee Woo-suk, CEO of Kolon Life Science and Kolon TissueGene, did not attend.

Invossa, which was approved by authorities in 2017, had its license revoked late last month after it was found that Kolon Life Science had filed false documentation for its approval. The gene therapy drug for knee osteoarthritis was approved on the basis that it used cartilage-originated basis cells, when in fact it used kidney cells.

The drug was taken off the market in April after the company revealed the presence of the cells.

Shortly after the license was revoked, the Korea Exchange suspended shares of Kolon TissueGene and its parent company Kolon Life Science that morning and announced it has started reviewing whether to delist Kolon TissueGene.

Although the suspension of Kolon Life Science was lifted the next day, Kolon TissueGene has continued to be suspended at 8,010 won per share. Before the suspension, the share price of Kolon TissueGene fell more than 80 percent from its March 5 peak of 42,850 won.

Authorities have been widening their investigation into the scandal since last month. They are focused on whether top executives of Kolon Life Science and its U.S. affiliate were aware that kidney cells were present in Invossa and intentionally hid the information.

The prosecution recently placed a travel ban on Kolon Group’s former chairman, Lee Woong-yeul, who was reported for investigation by Kolon TissueGene shareholders that filed a class-action lawsuit last month.

It also raided the Drug Safety Ministry building and headquarters of Kolon Life Science and the Korean unit of Kolon TissueGene in regard to the scandal.

Despite the escalation, Kolon Group has remained silent even though its fate significantly depends on the outcome of Invossa scandal.

Unlike its affiliate Kolon Life Science that made several apologetic statements since the scandal began, Kolon Group has consistently declined to comment.

Kolon TissueGene is 27.21 percent owned by the group holding company Kolon, followed by 17.8 percent by Lee Woong-yeul, 12.55 percent by parent company Kolon Life Science and 2.82 percent by Kolon Glotech.

Lee Woong-yeul, who announced his retirement from all positions within the group late last year, still holds 49.74 percent of Kolon and significant managerial power within the group.

Some industry watchers have speculated Kolon Group and Lee Woong-yeul are remaining silent as apologizing over the scandal would be acknowledging their part in letting it grow to this point.

Others believe that the conglomerate decided to stay silent in a bid to avoid unnecessary issues after spending more than two years fighting over compensation claims following a quick apology in response to an accident at its resort in February 2014.

Kolon Group made a public apology that it would provide compensation to affected families shortly after a gymnasium at the group-owned resort in Gyeongju, North Gyeongsang, collapsed under the weight of snow, leaving 10 dead and 105 injured.

BY KO JUN-TAE [ko.juntae@joongang.co.kr]