Celltrion and Humasis have filed a lawsuit against each other for damages in connection with their previous partnership for the Covid-19 diagnostic kit business.

The legal battle will center on which company is responsible for the breach of the diagnostic kit contract.

The lawsuit follows Celltrion terminating a contract to supply Humasis' at-home Covid-19 antigen diagnosis kit in December last year.

Initially, the two companies had signed a contract worth $114.78 million (133.6 billion won) on Jan. 22, 2022.

Then, Humasis said it only received $37.52 million out of the $114.78 million and filed a lawsuit against Celltrion claiming 120 billion won for the remaining diagnostic kits and damages caused by Celltrion's actions on Jan. 26.

In response, Celltrion filed a lawsuit against Humasis on Tuesday, claiming damages and refund of advance payments as it suffered damages due to Humasis not meeting the delivery date of the Covid-19 diagnostic kit.

Celltrion and Humasis jointly developed a Covid-19 rapid diagnostic kit in June 2020. The two companies developed Celltrion DiaTrust, a Covid-19 antigen rapid diagnostic kit, acquired the U.S. FDA's emergency use authorization in October 2021, and started supplying it in earnest.

At one time, Celltrion DiaTrust was so popular that it was hard to supply the kits in time. However, as the pandemic calmed down, the supply surpassed the demand, resulting in leftover kits.

In response, Celltrion stressed that it requested Humasis to suspend production and extend the delivery period in April of last year, citing sluggish sales.

However, Humasis argued that Celltrion unilaterally demanded a price cut as the extended delivery date approached and insisted on breaking the contract after Humasis did not accept the price cut.

"There has never been a single delay in delivery due to reasons attributable to the company," Humasis said. "Rather, production and delivery were suspended from April 25 of last year at the request of Celltrion, but more than eight months later, they are suddenly claiming that we did not keep our delivery date."

Humasis stressed that the “bad habit of large corporations demanding a unilateral price cut” due to sluggish sales must no longer happen.

In response to such claims, Celltrion stressed that it had placed orders with Humasis several times to supply supplies to the U.S. market from the second half of 2021 to early 2022, when demand for diagnostic kits surged as the number of confirmed Covid-19 cases in the U.S. soared.

"However, there were repeated situations where Humasis was unable to meet the scheduled delivery date," Celltrion said. "As a result, we were unable to supply diagnostic kits to the U.S. market in a timely manner, and our competitiveness in the local market suffered a major blow."

Celltrion has continued discussions with Humasis to resolve the situation amicably since April 2022, but Humasis refused to negotiate, it added.

Humasis embroiled in additional legal disputes

Humasis also faces an internal struggle over management rights.

Humasis CEO Cha Jeong-hak announced the sudden sale of his stake after the market close on Jan. 27 to Artist Cosmetics. Artist Cosmetics is an unlisted subsidiary of Mirae ING, which is owned by Namgoong-gyeon.

CEO Cha decided to sell his 2,593,814 shares, including those from related parties, at 25,060 won per share, for a total of 65 billion won.

While the acquisition seemed to resolve the ongoing conflict between CEO Cha and minority shareholders, JW Asset Management, which owns Humasis' bonds, objected to the acquisition and filed an application for an injunction.

JW Asset applied for a provisional injunction against Humasis, Artist Cosmetics, and four related members and asked the court to prohibit the execution of the acquisition contract until the invalidity of the stock purchase contract is confirmed.

JW Asset strongly criticized Artist Cosmetics as an uncapitalized M&A company.

In response, Humasis said it has submitted a written answer regarding the request for a provisional injunction.

"JW Asset is making groundless criticism of a legitimate M&A process to obtain personal gains," Humasis said. "We will actively respond to unfounded and malicious lawsuits to prevent damage to the company and shareholder value."