The lowest court ruled in favor of Medytox in a civil lawsuit involving Medytox and Daewoong Pharmaceutical regarding the source of the latter's botulinum toxin (BTX) strain. 

The Seoul Central District Court on Friday ruled in favor of Medytox in the lawsuit filed by Medytox against Daewoong Pharmaceutical and Daewoong Co., including the prohibition of infringement of trade secrets, and ordered Daewoong to compensate for damages of 40 billion won ($31.6 million), turn over Daewoong's BTX strain to Medytox, and discard all finished BTX products made with the strain.  

The ruling comes after Medytox filed a lawsuit against Daewoong Pharmaceutical for damages of 1.1 billion won in October 2017, claiming that a former employee stole Medytox's BTX strains and product manufacturing process technical documents and provided them to Daewoong Pharmaceutical. 

Since then, the claim for damages has been greatly increased to 50.1 billion won.

In the initial ruling, the court accepted most of Medytox's argument after considering it reasonable.

"The defendant (Daewoong) claims to have isolated the strain, but it is difficult to accept it given the reliability of the genetic characteristics and epidemiological evidence submitted," the court said in a ruling. "We believe that Daewoong Pharmaceutical shortened the development period by three months by using trade secret information from the plaintiff (Medytox) in establishing the strain development process."

The court stressed that it accepts and partially cites Daewoong Pharmaceutical's ban on manufacturing and selling its BTX products requested by Medytox.

"Part of the plaintiff's claim for damages is also admitted," the court said. 

After the ruling came out, Medytox immediately sent out a press release stating that it had regained the legitimate rights of its BTX strain five years and four months after filing a lawsuit against Daewoong.

"The court's ruling is a clear judgment made with scientific evidence that no one can refute, such as genome sequencing," a company official said. "Based on this ruling, we will expand Medytox's legitimate rights protection activities."

However, the company stopped short of explaining what kind of activities, such as filing lawsuits with other Korean BTX makers, it plans to take. 

Daewoong said it will appeal the court's decision, saying that the ruling was a “clear misjudgment.”

According to Daewoong, the ruling made by the lowest court contradicts the results of an extensive investigation conducted by the Seoul Central District Prosecutor's Office on Feb. 4, 2022.

During that time, the prosecutors had said that they found no evidence that Medytox's unique botulinum strain and manufacturing technology were leaked to Daewoong Pharmaceutical as a result of synthesizing seizure and search, digital forensics, and witness statements.

"We plan to proceed with all legal actions as soon as possible," a Daewoong official said. "We will apply for suspension of execution and appeal immediately, so there will be no impact on the Nabota business, and we will continue to target the global market."

By conducting truth-finding efforts, Daewoong will correct the misjudgment in the appeals court, he added. 

Medytox shares jump vs Daewoong, Hugel plunge

On Friday, Medytox's shares surged by a daily limit of 30 percent to close at 173,600 won.

Daewoong shares dropped to 124,200 won, down 19.35 percent from the previous day. 

As a side effect of the ruling, Hugel, which is currently embroiled in a U.S. International Trade Commission dispute over the origin of its strain with Medytox, also saw the stock price decline to 133,800 won, down 18.17 percent from the previous day. 

The ruling may also affect Evolus, which markets Daewoong's BTX products in the U.S., as all of Daewoong's BTX products are currently manufactured in Korea. 

As the ruling ordered Daewoong to discard all products made with Medytox's strain, Daewoong's thriving BTX export business will likely ground to a complete halt if Daewoong fails to receive a suspension of execution from the court. 

Above all, if the ruling leads to the cancellation of the license for Daewoong's BTX product, the Ministry of Food and Drug Safety may revoke its export permission.

As Evolus' revenue entirely consists of Jeuveau, the company will no longer be able to maintain sales if such a ruling happens. 

However, Evolus commented that the recent court ruling will not affect the manufacture, export, supply, or sale of Jeuveau or Nuceiva.

"Also, the settlement agreement with Medytox provided for continued manufacturing and commercialization for Evolus regardless of any litigation between Medytox and Daewoong," the company said.

Evolus' shares, which are listed on the U.S. Nasdaq market, stood at $9.20 as of market close on Thursday.