[Edaily NA EUN-KYUNG KIM SAE-MI Reporter] Kolon TissueGene, Inc.(950160) TG-C (formerly Invossa), a cell- and gene-based therapy for osteoarthritis, has once again reached a crossroads. After failing to meet the co-primary endpoints in its first U.S. Phase 3 clinical trial, market attention is now focused on the results of the second Phase 3 trial, set to be released this October. Industry observers suggest that if the second trial also fails to demonstrate clear efficacy, the company may have to wind down the development project—which has been ongoing for over 20 years—and consider using the remaining funds to secure new growth drivers.

“Fourth Child” Invos… October Is Effectively the Final Showdown

According to the pharmaceutical and biotech industry on the 31st, TG-C is the flagship pipeline symbolizing KOLON CORPORATION’s biotech business. It is also a project to which KOLON CORPORATION Honorary Chairman Ung-yeol Lee has shown special affection, even describing it as “my fourth child after my three children.”

KOLON CORPORATION first began developing TG-C in 1999. In 2017, it received domestic marketing approval for “Inbosa,” the world’s first gene therapy for osteoarthritis, but the approval was revoked in 2019 amid controversy over the cell’s origin. U.S. clinical trials were also suspended, and Kolon TissueGene, Inc. faced a crisis of survival, even undergoing a delisting review.

The turnaround began in 2021 when the U.S. Food and Drug Administration (FDA) authorized the resumption of clinical trials. Subsequently, Kolon TissueGene, Inc. resumed stock trading in 2022 and has since conducted two Phase 3 clinical trials in the U.S.

However, in the TGC-15302 trial announced last month, the drug failed to meet the co-primary endpoints, including the Visual Analog Scale (VAS) and the Western Ontario and McMaster Universities Osteoarthritis Index (WOMAC). The company plans to determine its future development strategy by conducting additional analyses and synthesizing the results of the TGC-12301 trial, which are scheduled to be released this October.

Improving osteoarthritis pain is considered a challenging area in which to demonstrate efficacy during new drug development. This is because patients’ perceptions of pain vary, and assessments are heavily influenced by subjective factors, the placebo effect, and the use of rescue medications. This is why it is difficult to definitively judge TGC-1’s potential based solely on the first set of results, and it also makes it hard to be optimistic about the success of the second trial. Some observers point out that if consistent efficacy is not demonstrated in two large-scale confirmatory clinical trials, one must question the drug’s actual efficacy rather than simply attributing the results to clinical variability.
KOLON CORPORATION, which

has provided 316 billion won in funding… Is additional investment possible

?

Since 2021, KOLON CORPORATION has directly invested 256 billion won in Kolon TissueGene, Inc. through a third-party private placement. Including this year’s issuance of 60 billion won in exchangeable bonds (EBs), the total funds mobilized to support TG-C amount to 316 billion won.

Kolon TissueGene, Inc. maintains that it has no immediate liquidity issues. As of the end of the first quarter of this year, the company held approximately 122.1 billion won, comprising 94.9 billion won in cash and cash equivalents and 27.2 billion won in short-term financial instruments.

Kim Jeong-in, Chief Financial Officer (CFO) of Kolon TissueGene, Inc., responded to a follow-up question from Edaily during a press briefing on the 21st of last month, stating, “With our current funds, we have no issues covering the additional analysis of Trial 15302 and the verification of Trial 12301 results.” He added, “The timing, direction, and purpose of the funds previously raised for commercialization may change.”

He continued, “Depending on the results of the 12301 trial, the required clinical trial duration, number of patients, and costs may vary, so we will need to consult with the largest shareholder again based on those results,” adding, “I believe KOLON CORPORATION is fully willing to provide additional funding. If they determine that the intrinsic value of the TG-C compound has not changed, there is room for the largest shareholder to continue driving the development forward.”

However, the financial capacity of the largest shareholder,KOLON CORPORATION(002020)Co., Ltd., does not appear to be unlimited. It is reported that KOLON CORPORATION sought to sell the members-only Ujeong Hills Country Club to improve its financial structure but has not yet finalized the transaction due to disagreements over the price. KOLON CORPORATION’s debt-to-equity ratio, on a consolidated basis as of the end of the first quarter of this year, was 204%. Current liabilities stood at 3.6467 trillion won, exceeding current assets (2.1960 trillion won) by approximately 66%, indicating significant short-term liquidity pressure.

“With 120 billion won, we could even introduce a new pipeline”

Kolon TissueGene, Inc. cannot freely use all of its cash reserves either. As of the end of March this year, outstanding convertible bonds (CBs) totaled 147.5 billion won, consisting of 25 billion won from the third series and 122.5 billion won from the fourth series. Investors may request early redemption of the Series 3 CB starting in February 2027 and the Series 4 CB starting in September of the same year. If the stock price falls below the conversion price and clinical trials are delayed for an extended period, the company may have to secure funds for both additional clinical costs and CB redemption simultaneously.

For this reason, industry observers believe that the October results will be the final turning point in determining Kolon TissueGene, Inc.’s capital allocation strategy. Since TG-C is effectively the company’s sole core pipeline, it would be difficult to immediately announce the suspension of development; however, if the results once again fall short of expectations, the company must make a sober judgment as to whether investing its cash reserves in additional clinical trials is in the best interest of shareholders.

A CFO at a biotech company stated, “I fully understand that it is difficult for KOLON CORPORATION to give up easily, given that it has been developing TG-C for over 20 years,” but added, “If clear efficacy is not confirmed in the second clinical trial, the company must objectively assess the efficiency of future funding, regardless of the costs already incurred.”

He continued, “The 120 billion won currently on hand is more than enough to acquire a promising new pipeline,” emphasizing, “Although it may be painful in the short term, securing a new candidate compound rather than reinvesting the company’s cash reserves into TG-C could be a better choice for both the company and its shareholders in the long run.”