[Toxin War]③ Entering Round 2 of Legal Battle... Possibility of Escalation

The toxin war has entered round 2 following Daewoong Pharmaceutical's appeal. With the first trial verdict taking over five years, it is expected that the higher court's judgment will also take a considerable amount of time. Considering that the source of strains for most domestic botulinum toxin (BTX) product manufacturers remains unclear, the possibility of an escalation in the toxin war cannot be ruled out.

[Image source=Yonhap News]

Earlier, Daewoong Pharmaceutical immediately expressed its intention to appeal, calling the Seoul Central District Court's first trial verdict a "clear misjudgment," and simultaneously filed for a stay of execution on the ruling. When the court approved the stay of execution on the 17th of last month, Daewoong Pharmaceutical was able to continue the production, sales, and overseas export of its BTX product Nabota until the higher court's decision.

However, since the outcome of the higher court's ruling remains uncertain, Daewoong Pharmaceutical faces uncertainty regarding the production and export of Nabota. If the higher court delivers the same verdict as the first trial, Daewoong Pharmaceutical will inevitably suffer significant damage. Not only will the production of Nabota be prohibited, but existing products will also have to be discarded. Exports will also become uncertain, as Nabota is entirely produced domestically. Daewoong Pharmaceutical exports Nabota to the U.S. market through its partner Evolus and has recently launched the product in Germany and Austria, entering the European market. Given Nabota's significant contribution to Daewoong Pharmaceutical's sales and operating profit, it is expected to have a substantial impact on the company's performance. Industry insiders estimate Nabota's operating profit margin to exceed 50%.

Analysts in the securities industry also point to significant uncertainty surrounding Daewoong Pharmaceutical. Ha Taegi, a researcher at Sangsangin Securities, explained, "The business value of Nabota is inevitably being downgraded compared to before," adding, "This is because the brand image could be somewhat damaged, and it may be disadvantaged in marketing against competitors."

The possibility of Daewoong Pharmaceutical implementing a 'Plan B' by introducing an entirely new BTX strain is also being discussed, as the litigation period is expected to be prolonged. Heo Hyemin, a researcher at Kiwoom Securities, suggested, "A long-term battle of 3 to 5 years is anticipated due to the injunction lawsuit and appeal," and added, "With Plan B, a new strain can be secured, and clinical trials can be conducted with the new strain before the Supreme Court's ruling to replace Nabota."

There is also a possibility of escalation in the toxin war. Medytox expressed its intention to take legal action against other companies immediately after the first trial verdict against Daewoong Pharmaceutical. Previously, Medytox suspected that another BTX product manufacturer, Hugel, had also stolen its strain and filed a complaint with the U.S. International Trade Commission (ITC) in March last year. A Medytox official stated, "We will promptly review additional legal measures against companies that have illegally acquired BTX strains and manufacturing processes for commercialization," but added, "It is still at the stage of review, and it is not yet appropriate to mention specific company names."

The fact that few BTX product manufacturers have relatively clear strain origins also adds weight to the possibility of escalation. An industry insider familiar with the issue explained, "Since Medytox and Jetema are the only domestic companies with clear BTX strain origins, there is a high risk that the issue could spread to other companies." Jetema imported BTX strains from the UK's public health agency in 2017.

In response, domestic companies producing BTX products have repeatedly stated that their BTX products are unrelated to the current lawsuit immediately after the verdict. Hugel, which is engaged in a dispute with Medytox in the U.S., has claimed that it secured its BTX strain from spoiled canned food. Hugel stated, "The lawsuit between Medytox and Daewoong Pharmaceutical is completely unrelated to us," and asserted, "It will be clearly confirmed that there are no issues with the development timing, circumstances, and manufacturing process of our BTX product."

Huons Biopharma also explained that its BTX strain is distinctly different from other companies' strains. The company is known to have purchased the strain from the domestic bio company Biotopia. A Huons Biopharma official said, "The strain of our BTX product Liztox (Hutox) has clear genetic and biochemical characteristics, and we have completed submission of the acquisition details to the Korea Disease Control and Prevention Agency," but added, "Although the strain was purchased from Biotopia, it is difficult to verify the acquisition route as it was a long time ago."