[Edaily Reporter KIM SAE-MI ] #KOLON CORPORATION’s “TG-C,” a cell- and gene-based therapy for osteoarthritis that the company has been developing for 27 years, has failed its Phase 3 clinical trial in the U.S. TG-C is a new drug to which Lee Woong-yeol, Honorary Chairman of KOLON CORPORATION, has shown such deep affection that he referred to it as his “fourth child” after his three biological children. KOLON CORPORATION’s long-term project—aimed at restoring its reputation through U.S. Food and Drug Administration (FDA) approval following the revocation of its domestic marketing authorization—has reached a critical juncture.

Failed to Meet All Primary Endpoints Despite Risk-Mitigated Design

Kolon TissueGene, Inc.(950160)announced at 5:55 p.m. on the 21st that TG-C failed to demonstrate statistical significance compared to the placebo for both primary

endpoints

—the 12-month VAS pain score and the WOMAC total score—in its U.S. Phase 3 clinical trial.

The change in VAS scores was -38.7 for the TG-C group and -39.2 for the placebo group; in fact, the placebo group showed a 0.5-point greater improvement. In numerical terms, this means the placebo group experienced a greater reduction in pain than the TG-C group. The p-value was 0.8322, which is very high. For the WOMAC total score, the TG-C group recorded -27.61 and the placebo group -26.54; while the TG-C group showed a 1.07-point greater improvement, the p-value was only 0.5701.

It is particularly disappointing that no substantial difference was observed between the treatment group and the placebo group in this trial involving 531 participants. One of the reasons the biotech industry had high hopes for the success of this U.S. Phase 3 clinical trial for TG-C was its conservative clinical design.

Kolon TissueGene, Inc. set VAS and WOMAC—which had demonstrated statistical significance in previous domestic Phase 3 and U.S. Phase 2 trials—as the co-primary endpoints for the U.S. Phase 3 trial. Endpoints related to structural improvement, necessary for validation as a disease-modifying osteoarthritis drug (DMOAD), were designated as secondary endpoints. Observers noted that by setting the primary endpoints based on the metrics in which the company had the most confidence, the company had reduced the risk of clinical failure.

Jeon Seung-ho, CEO of Kolon TissueGene, Inc., stated earlier this year that “there is absolutely no chance that the Phase 3 clinical trial results will fail,” a remark widely interpreted as an expression of this confidence.

The remaining variable is the results of the second U.S. Phase 3 clinical trial, which will be released this October. Unless this trial demonstrates very clear and consistent efficacy, TG-C’s U.S. approval strategy is expected to face significant challenges. If the second trial also fails, it cannot be ruled out that the funds raised on the premise of TG-C’s commercialization will have to be repurposed as survival capital.

TG-C:

A 27-Year Bet… Aiming to Restore Reputation in the U.S.

TG-C is regarded as the symbol of KOLON CORPORATION’s biotech business. KOLON CORPORATION established Kolon TissueGene, Inc.

in the U.S.

in 1999 and began full-scale development of TG-C. This year marks the 27th year of that effort. Counting from 1994, when initial substance research began, the R&D period spans 32 years.

In 2017, TG-C received marketing authorization from the Ministry of Food and Drug Safety under the name “Inbosa-K,” garnering attention as the world’s first gene therapy for osteoarthritis. However, in 2019, it was revealed that the actual cellular composition differed from what was submitted at the time of approval, leading to the revocation of its domestic marketing authorization. Phase 3 clinical trials in the U.S. were also halted, and Kolon TissueGene, Inc. was pushed to the brink of delisting.

In April 2021, the U.S. clinical trial resumed, laying the groundwork for a comeback. Based on the resumption of the clinical trial and improvements in financial performance and corporate governance, the Korea Exchange decided to maintain the company’s listing, and trading of Kolon TissueGene, Inc. shares resumed in October 2022—after a hiatus of about three years. With the criminal trial involving the owner’s family resulting in a final acquittal this past February, KOLON CORPORATION has once again redoubled its efforts on the development and commercialization of TG-C.

The success of the U.S. Phase 3 clinical trial carried significance beyond that of a mere new drug development achievement. It was seen as an opportunity to restore the trust eroded by the revocation of the domestic marketing authorization through FDA approval, and to have TG-C’s efficacy and product value recognized once again in the world’s largest pharmaceutical market. The appointment of KOLON CORPORATION Vice Chairman Lee Kyu-ho to the Kolon TissueGene, Inc. board this year was also interpreted as a move demonstrating responsible management ahead of commercialization and the group’s commitment to providing support.

The group’s financial investment was also substantial. Over the past five years, KOLON CORPORATION has provided 316 billion won in support to Kolon TissueGene, Inc. Including external investments, a total of 552.5 billion won was invested. Last year, the company raised funds necessary for FDA approval and commercialization by successively issuing 56.5 billion won and 122.5 billion won in convertible bonds (CBs). However, with the failure of the first U.S. Phase 3 clinical trial, there is now a possibility that the funds earmarked for commercialization will be redirected toward additional clinical trials, company operations, and the repayment of the CBs.

From the reliability of internal analysis to allegations of preemptive information leaks

The market is raising concerns about the possibility of preemptive information leaks, given that Kolon TissueGene, Inc. calculated

its

topline

results

using its internal analysis team rather than a contract research organization (CRO). Furthermore, Kolon TissueGene, Inc. exacerbated market confusion by distributing a press release containing figures that differed from its official disclosure that day.

These market suspicions were fueled by the fact that Kolon TissueGene, Inc.’s stock price plummeted by 15,800 won (20.28%) on the 16th—the trading day immediately preceding the announcement of these clinical results—compared to the previous day. At the time, some observers raised doubts that the sharp drop in the stock price might have been caused by a leak of data being analyzed at the U.S. headquarters. While a stock price decline alone cannot conclusively prove a leak of undisclosed information, this regulatory filing has reinforced such suspicions.

The fact that the press release distributed on the same day presented a large number of clinical figures that differed from those in the regulatory filing also raised questions about Kolon TissueGene, Inc.’s data management capabilities. While the regulatory filing listed the WOMAC change as -27.61 for the TG-C group and -26.54 for the placebo group, the press release listed them as -26.34 and -27.57, respectively. These discrepancies went beyond simple rounding errors; the figures even appeared to show the opposite result regarding which group demonstrated greater improvement. Similarly, for VAS scores, the regulatory filing listed -38.7 and -39.2, while the press release listed -38.6 and -39.1—a difference of 0.1 in each case.

The company explained that the figures in the regulatory filing are the final, confirmed values and that the incorrect numbers in the press release were due to an error by the person responsible for drafting it. However, the fact that key figures were incorrectly reported in multiple places in a document announcing the success or failure of a Phase 3 clinical trial raises questions about whether the company’s internal verification system—which cross-checks internal statistical results with regulatory filings and external announcements—functioned properly.

Meanwhile, Kolon TissueGene, Inc. is scheduled to hold a press conference at 10:00 a.m. today at the KOLON CORPORATION One & Only Tower in Gangseo-gu, Seoul, to provide a detailed explanation of the results of the U.S. Phase 3 clinical trial for TG-C. The main points of discussion are expected to include the cause of the higher-than-expected placebo response, the reasons for failing to replicate the efficacy observed in previous clinical trials, and the company’s internal statistical analysis and data verification procedures.