iOFlow Stumbles Amid Competitor's Lawsuit Filing

Second in the World to Commercialize Wearable Insulin Pump
Lawsuit by Market-Leading Company... Uncertainty Grows as Injunction for Business Suspension is Granted

IoFlow, which succeeded in commercializing the world's second wearable disposable insulin pump, has become embroiled in a lawsuit filed by a competitor. Additionally, a sharp drop in stock price occurred as CEO Kim Jae-jin, the founder of IoFlow, sold shares he held to repay a loan. Medtronic, a global U.S. healthcare company that highly valued IoFlow's technology and intended to acquire the company, is postponing the execution of the merger and acquisition (M&A) contract while monitoring the lawsuit developments.

According to the Korea Exchange on the 27th, IoFlow's stock price fell 56.5% over seven trading days since trading resumed on the 16th. The stock price, which was above 20,000 won, dropped below 10,000 won.

IoFlow is a developer and manufacturer of wearable medical devices. It commercialized the insulin pump second only to Insulet in the U.S. An insulin pump is a smart medical device attached to the body that continuously delivers small amounts of insulin 24 hours a day. IoFlow received approval from the Korean Ministry of Food and Drug Safety for its IoPatch product in 2017 and has been selling it since April 2021. It obtained European CE certification in May 2021 and has been selling in Europe since October last year. It also acquired product approvals in the United Arab Emirates (UAE) and Indonesia last year.

Previously, the Korea Exchange suspended trading of IoFlow shares from the 11th of last month. This was due to a court granting a preliminary injunction related to a lawsuit filed by competitor Insulet concerning overseas intellectual property infringement and unfair competition. Regarding the U.S. court's injunction, IoFlow explained that Insulet's lawsuit is aimed at blocking Medtronic's acquisition of IoFlow, the world's only wearable patch pump competitor.

According to the KOSDAQ market listing regulations, suspension of major business operations is grounds for a substantial review of listing eligibility. The Korea Exchange decided to determine whether IoFlow falls under the scope of such a review after suspending its trading.

The Korea Exchange judged that IoFlow does not fall under the substantial review criteria and decided to resume trading from the 16th. On the day trading resumed, Korea Investment & Securities sold 664,097 shares of CEO Kim Jae-jin's shares held as collateral on the market. Korea Investment & Securities lent 20 billion won by taking 3.66 million shares held by CEO Kim as collateral in two rounds in September and October last year. The loan contract matured on the 31st of last month, and some of it appears to have been recovered following the resumption of stock trading.

On the 23rd, CEO Kim disclosed that he repaid 10 billion won of the stock-collateralized loan by selling some of the collateral shares on the market due to debt recovery actions by the lending financial institution. He added that the remaining loan amount is 10 billion won, with 1,886,793 shares still provided as collateral. Korea Investment & Securities agreed to defer the exercise of collateral rights related to the remaining loan amount until the 15th of next month. The fact that some shares were sold on the 16th was revealed on the 23rd, and the stock price fell to the limit down on the following day, the 24th.

CEO Kim said, "I understand concerns about uncertainties such as the ongoing lawsuit in the U.S. and the M&A with Medtronic," adding, "We are focusing all our capabilities to resolve these issues." He also explained that due to the contract with Medtronic, he cannot say much about the company or his shares recently, but he clarified that recent market concerns are somewhat excessive. Regarding the remaining 10 billion won loan, it is known that various discussions are underway to minimize market shock, including refinancing options.

IoFlow has formally filed an appeal against the U.S. court's preliminary injunction decision through its U.S. legal representative and is actively responding to the ongoing main lawsuit. A company official stated, "The appeal against the injunction will be reviewed mainly on legal grounds by a panel of three judges at the federal court," adding, "We will sufficiently demonstrate that Insulet, which filed the lawsuit, failed to take adequate measures to protect the trade secrets it claims and that the trade secrets Insulet alleges are too broad and vague." Furthermore, "In the main lawsuit, we will prove through evidence that IoFlow independently developed the product with significant time and effort," the official added.

IoFlow expects a favorable outcome in Insulet's lawsuit because there is no dispute over the most critical technology, the drive unit, which is essential for making disposable wearable pumps.