400 Billion Won Compensation to Medytox
Battle to End Only After Supreme Court
Daewoong Applies for Stay of Enforcement
Calming Market Concerns and Preparing Alternatives
[Asia Economy Reporter Myung-Hwan Lee] ‘The past 5 years and the next 5 years’
This phrase summarizes the reality of Daewoong Pharmaceutical’s botulinum toxin (BTX) after a complete defeat in the first round of litigation against Medytox. On the 10th, the Seoul Central District Court ruled in favor of Medytox in a lawsuit seeking to prohibit trade secret infringement filed against Daewoong Pharmaceutical, involving approximately 50 billion KRW. The court also ordered Daewoong Pharmaceutical to pay 40 billion KRW in damages to Medytox, prohibit the use of related manufacturing technology, dispose of produced finished and semi-finished products, and hand over BTX strains. This is Daewoong Pharmaceutical’s defeat after 5 years and 4 months since Medytox filed the lawsuit in October 2017. The stock market also showed the joy and sorrow of sharp rises and falls in the stock prices of both companies. This battle will not end until it goes to the Supreme Court, which will take at least 3 to 5 years.
Daewoong Pharmaceutical’s course can be summarized into three points: ▲litigation response ▲alleviating market concerns ▲preparing Plan B (alternative). The company first called the first trial result a ‘clear misjudgment,’ announced an appeal, and decided to prevent any impact on the production and export of Nabota through an application for suspension of compulsory execution. Daewoong Pharmaceutical’s BTX product ‘Nabota’ is currently produced entirely at Daewoong Pharmaceutical’s factory in Hyangnam-eup, Hwaseong-si, Gyeonggi-do, and exported to overseas markets such as the United States.
Regarding the possibility of disruption in overseas exports, the company said, "Our partner Evolus officially stated that ‘the civil judgment does not affect the production, export, or overseas sales of Jeuveau and Nuceiva (the export names of Nabota).’" According to Daewoong Pharmaceutical, Evolus, through an agreement with Medytox in February 2021, stipulated continuous manufacturing and commercialization by Evolus regardless of the outcome of the Korean litigation between Daewoong Pharmaceutical and Medytox. This includes Daewoong Pharmaceutical’s right to manufacture Nabota and export it to Evolus, and Evolus’s right to continue commercializing the product.
Researcher Jaekyung Park of Hana Securities also analyzed, "Daewoong Pharmaceutical has the right to manufacture Jeuveau and Nuceiva and export them to Evolus, and Evolus has the right to continue commercializing these products. The litigation result will have no impact on U.S. sales, nor on regions where Evolus holds rights such as Europe, Australia, and Canada." Researcher Hyemin Heo of Kiwoom Securities said, "Rather than short-term impact, a long-term battle of 3 to 5 years is expected due to injunction lawsuits and appeals. As Plan B, a new strain can be secured to conduct clinical trials with the new strain before the Supreme Court ruling, potentially replacing Nabota."
If the first trial result is finally confirmed by the Supreme Court, the situation will be at its worst. There are also issues related to approval by the Ministry of Food and Drug Safety. According to the Infectious Disease Prevention and Control Act, ‘If a person who has been granted a pathogen possession permit obtains the permit by fraudulent means, the permit must be revoked.’ If the higher court’s ruling also recognizes Daewoong Pharmaceutical’s strain theft as is, the approval of Nabota itself may be revoked.
The legal battle over BTX strains may spread across the industry. Medytox has announced it will consider legal actions against other companies as well. A Medytox official said, "Based on this ruling, we will expand Medytox’s legitimate rights protection activities and promptly review additional legal actions against companies that have illegally acquired and commercialized Medytox’s BTX strains and manufacturing processes." An industry insider also said, "Since Medytox and Zetema are the only domestic companies with clear origins of BTX strains, this may affect other companies as well."
In March last year, Medytox also filed a lawsuit with the U.S. International Trade Commission (ITC) requesting the import ban of BTX ‘Botulax’ by Hugel in the U.S. A Hugel official responded, "(Hugel) has been recognized for independent research and development for over 20 years," adding, "It will be clearly confirmed that there are no issues with the development timing, process, or manufacturing of the BTX formulation, and the litigation result between Medytox and Daewoong Pharmaceutical will not pose any obstacle to our ongoing lawsuit with Medytox in the U.S." Similarly, Huons Biopharma, which produces the BTX formulation ‘Liztox,’ explained, "We have completed the whole genome sequencing analysis of the strains we possess and submitted the results to the Korea Disease Control and Prevention Agency, confirming no issues. We also have additional genetic and biochemical strain characteristics secured."
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