The stock market operator said it would review whether to keep Kolon TissueGene on the KOSDAQ market, as the government revoked the license of its gene therapy Invossa-K.
The Korea Exchange (KRX) said it would make the ruling by July 26. If the regulator delists Kolon TissueGene, its 489.6 billion won ($416.3 million) worth shares could turn valueless.
The KRX said the company might have submitted false data to the regulator when the company was seeking preliminary review for listing on the secondary market in June 2017.
The KRX’s decision to review delisting of Kolon TissueGene was mainly affected by the latest ruling of the Ministry of Food and Drug Safety to nullify the Invossa permit.
The ministry announced on May 28 that it would revoke the Invossa license, saying Kolon TissueGene’s parent firm Kolon Life Science had submitted false data to win local approval for Invossa. Besides, Kolon had concealed important information before obtaining the license for Invossa and failed to provide scientific evidence to explain how the labeling of the drug ingredient was changed to cartilage-derived cells from kidney-derived cells, the ministry said.
The KRX said Kolon TissueGene might have breached listing regulations because the company’s listing on KOSDAQ was based on the ministry’s Invossa approval.
Before Kolon TissueGene went public in 2017, the company had received mixed views on its value. As the company promoted Invossa as the world’s first osteoarthritis gene therapy, supporters gauged the company’s value at over 2 trillion won at the time. However, skeptics were unsure about its value because Invossa was still going through clinical trials in the U.S.
The KRX granted Kolon TissueGene to be listed on the KOSDAQ because the U.S. trials were phase-3, the company had already obtained the local license, and commercialization of Invossa in the U.S. would make the drug “first-in-class.”
The KRX’s review for delisting has three criteria: how significant the fraudulent information is, whether the company intentionally or mistakenly provided false data; and how much impact the false information will be on investment decisions.
As for the company’s intention or mistake to submit fraudulent data, the prosecution is investigating the matter. The prosecutors raided Kolon Life Science and the Korean branch of Kolon TissueGene. On Tuesday, they summoned Kolon TissueGene executives to probe whether they violated the Pharmaceutical Affairs Act and the Capital Market Act.
Industry watchers said If Kolon gets to resume trials on Invossa in the U.S., Kolon TissueGene might not be delisted because the mislabeling of the drug ingredient will lose significance.
“If the U.S. Food and Drug Administration approves resumption of trials on Invossa with different labeling of the drug ingredient, Invossa’s potential value as a new drug remains valid,” a lawyer at a law firm said. “Even if the labeling was wrong at the time of listing, it could be viewed as insignificant to affect the value of Kolon TissueGene. Then, the company could remain in the stock market.”
In contrast, a decision to kick the company out of the KOSDAQ market is likely to lead to massive lawsuits. Over 300 shareholders of Kolon TissueGene have already filed lawsuits against the company for damage compensation. The number of suits and claims for damage compensation can go up, as delisting approaches.
Kolon TissueGene said it would tell the KRX that it did not intend to use false data and that it would submit a plan to improve management, including the possibility of the resumption of U.S. trials.
If Kolon TissueGene submits the management improvement plan to the KRX, the regulator will convene a meeting of the corporate review committee to decide a delisting of Kolon TissueGene or give a period for business improvement within 20 business days.
<© Korea Biomedical Review, All rights reserved.>