Kolon Group is in the biggest crisis since its foundation as the Ministry of Food and Drug Safety has revoked the license of Kolon Life Science's Invossa-KInj. Invossa has been regarded as the biggest achievement of the former group chairman Lee Woong-yeul, who used to say that he invested a third of his life in developing the drug, which was once considered to be a blockbuster drug.
Kolon Group and Lee are facing accusations of civil organizations and enormous damage compensation lawsuits filed by patients and minority shareholders. In addition, technology export deals worth 1 trillion won are at the risk of being revoked due to the Invossa license cancellation, shaking up the entire group to its foundation.
Since the inauguration of former chairman Lee in 1996, Kolon Group has focused on the biopharmaceutical sector. Lee made a decision to develop Invossa on Nov. 3, 1998, and launched a drive for gene therapy development. In 1999, he established Kolon TissueGene in Maryland, United States, and Kolon Life Sciences in Korea the following year. Despite opposition from executives, he invested about 110 billion won for 20 years to develop a gene therapy and succeeded in receiving a license for Invossa from the Ministry of Food and Drug Safety in July 2017. The success of Invossa became a symbol of Lee’s insight and perseverance.
Now, Lee cannot avoid responsibilities for the Invossa fiasco. He has 49.74 percent stake in Kolon Holdings, the group’s holding company, and Kolon Holdings owns 20.37 percent of Kolon Life Sciences and 27.82 percent of Kolon TissueGene. In addition, Lee personally has a 14.40 percent stake in Kolon Life Sciences and a 17.83 percent stake in Kolon TissueGene, meaning that he owns more than 30 percent of these two companies.
Kolon Group is expected to face a series of accusations. On may 28, the Drug Ministry said it would file a criminal complaint against Kolon Life Sciences and CEO Lee Woo-suk for violating the Pharmaceutical Affairs Act. On May 21, a civil organization calling for free medical care filed a complaint against Lee with the prosecutors’ office for fraud. Patients and minority shareholders are also preparing to file lawsuits. About 240 patients who received injections of Invossa filed a lawsuit against the company claiming 2.5 billion won in damages immediately after the Drug Ministry’s cancellation of the license for the drug. In addition, minority shareholders of Kolon TissueGene, who suffered losses of 400 billion won due to the share price drop following the fiasco, are also making moves to file lawsuits.
In particular, Kolon Life Sciences is facing big overseas lawsuits. The company concluded Invossa licensing-out deals totaling 1.24 trillion won last year, including a contract with Mundipharma for sales of Invossa in the Japanese market (667.7 billion won) and a supply agreement with Hainan Province in China (230 billion won). It also signed a technology export contract with Mitsubishi Tanabe Pharma in Japan in 2017, but is in the middle of an international lawsuit filed by Mitsubishi.
In addition to dealing with a number of lawsuits, Kolon has to conduct a long-term tracking of the 3,707 patients who received Invossa injections over the next 15 years. This project, which involves more than 20 examinations, is expected to cost about 80 billion won.
Meanwhile, Kolon Life Sciences issued a statement following the Drug Ministry’s announcement, saying, "Our documents produced in the development stage lack some data when seen from today’s perspective, but there was no manipulation or concealment of data. Since our case has not been accepted by the Drug Ministry in revoking the license for Invossa, we will respond to it through appropriate measures.”