Kolon Life Science CEO Lee Woo-seok Arrested and Indicted on 7 Charges Including Pharmaceutical Affairs Act Violations Over 'Invossa Suspicion'

Lee Woo-seok, CEO of Kolon Life Science, who is suspected of being involved in the controversy surrounding the osteoarthritis gene therapy 'Invossa K Injection (Invossa)', is attending the pre-trial detention hearing at the Seoul Central District Court in Seocho-gu, Seoul on the 31st. Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Song Seung-yoon] Lee Woo-seok, CEO of Kolon Life Science, who was involved in suspicions surrounding the osteoarthritis gene therapy drug Invossa, has been indicted while in custody.

The Criminal Division 2 of the Seoul Central District Prosecutors' Office (Chief Prosecutor Lee Chang-soo) indicted CEO Lee on the 20th on seven charges including violation of the Pharmaceutical Affairs Act, violation of the Capital Markets Act, violation of the Subsidy Management Act, obstruction of official duties by deception, fraud, violation of the Act on the Aggravated Punishment of Specific Economic Crimes (fraud), and obstruction of business. Under the principle of vicarious liability, Kolon Life Science and Kolon TissueGene were also indicted without detention.

CEO Lee is accused of manufacturing and selling Invossa using a 'kidney-derived cell (GP2-293)' component, which differs from the approved 'cartilage cell' component, despite having received product approval from the Ministry of Food and Drug Safety (MFDS) for the Invossa second component as 'cartilage cells' from November 2017 to March last year (violation of the Pharmaceutical Affairs Act).

The prosecution judged that CEO Lee knew since July 2017 that Invossa contained kidney-derived cells instead of cartilage cells but concealed this fact and submitted false documents to obtain MFDS approval, applying charges of obstruction of official duties by deception.

The prosecution also determined that CEO Lee was involved in Kolon TissueGene's 'stock listing fraud.' Kolon TissueGene, a subsidiary of Kolon Life Science that led the development of Invossa, was listed on the KOSDAQ market in 2017 following MFDS approval of Invossa. The prosecution believes Kolon TissueGene used false documents submitted during the MFDS approval process of Invossa in this listing process.

The prosecution applied charges of violation of the Capital Markets Act against CEO Lee as well. It is alleged that he concealed the fact that the US clinical trial for Invossa was halted in November 2017 and that the main component of Invossa's second injection was kidney-derived cells, inducing subscription through false or omitted information in securities registration statements, committing stock listing fraud. The subscription payments made at that time amounted to approximately 200 billion KRW.

CEO Lee is also accused of fraud by deceiving patients into believing that Invossa's second injection contained 'cartilage cells' when it actually contained 'kidney-derived cells,' and by making false and exaggerated efficacy advertisements, collecting about 7 billion KRW from patients.

Regarding the part where Kolon Life Science obtained 8.2 billion KRW in national subsidies by fabricating documents from November 2015 to July 2018 to be selected for the government's global advanced biopharmaceutical technology development project, charges of fraud under the Act on the Aggravated Punishment of Specific Economic Crimes and violation of the Subsidy Management Act were applied.

Invossa is an osteoarthritis gene therapy injection composed of two components: the first containing human cartilage cells and the second containing genetically modified cells introduced with cartilage cell growth factor (TGF-β1). It was the first gene therapy approved by the MFDS in Korea in 2017. However, the genetically modified cells in the second component were revealed to be kidney cells capable of causing tumors, not cartilage cells as stated in the submitted approval documents, leading to the final cancellation of approval in July last year.

The prosecution requested an arrest warrant for CEO Lee once in December last year, but it was dismissed by the court. After supplementary investigations, the prosecution re-requested the warrant, which was granted, and has continued the investigation under detention. In the same month, three others were also indicted in custody: Director Cho, who oversaw clinical development, Executive Director Kwon of Kolon TissueGene involved in the stock listing fraud, and Head Yang of Kolon Life Science.

A prosecution official stated, "We plan to promptly investigate other related parties, including the group management executives."