Mitsubishi Tanabe Pharma notified Kolon Life Science that the Japanese drugmaker would rescind the technology import deal of Invossa, a cell-mediated gene therapy for osteoarthritis.

The Korean biotech company said in a public regulatory filing that it received the Japanese company’s request to return 2.5 billion yen (27.3 billion won) of contract money, along with the cancellation of the deal.

Mitsubishi Tanabe said Kolon Life Science did not explain that its subsidiary TissueGene, the developer of Invossa, considered changing the production site for the phase-3 clinical trial in the U.S.

The Japanese firm also argued that Kolon Life Science did not deliver the U.S. FDA’s clinical hold letter, which stated that a clinical trial should begin after receiving approval for the use of the investigational drug for the phase-3 clinical trial.

According to TissueGene, the company initially planned to produce the experimental drug in Wusi, China, but later changed the production firm to Lonza, a custom manufacturing organization.

TissueGene said the company shared the information about a possible change in the production site.

The company also said the clinical hold letter, which called for winning approval for the use of the drug before administering it to patients, can occur during a clinical trial.

“Mitsubishi Tanabe’s claims do not seem to be sufficient for canceling the deal. We plan to start a bilateral negotiation,” Kolon Life Science said.

The technology export deal was to allow the Korean biotech firm to receive a total of 471.6 billion won (43.2 billion yen or $436 million) in phased technological fees.

TissueGene said on Wednesday that the company would continue to prepare for a phase-3 clinical trial on Invossa in the U.S., regardless of the issue of the technology export deal.

“Mitsubishi Tanabe’s notice about its intention to cancel the deal with Kolon Life Science will not affect Invossa’s phase-3 clinical trial in the U.S.,” TissueGene said. “We are preparing for the study smoothly as planned. Based on results of the U.S. study, we will search for ways to enter the global market.”

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