The Placebo Won … July Took Kolon TissueGene and Medipost’s Knee Treatments in Opposite Directions

Two Korean cell therapies targeting knee osteoarthritis stood at opposite points in the United States last month.

Kolon TissueGene disclosed on the 20th of last month that its osteoarthritis cell gene therapy TG-C failed to achieve statistical significance versus placebo in a U.S. phase 3 trial. Medipost said on the 8th of the same month that it had dosed the first patient in the U.S. phase 3 trial of Cartistem, a knee cartilage treatment. The two companies have followed different paths for more than 15 years while pursuing the same disease, the same regulator and the same final hurdle.

One Injection or One Surgery

The two products differ from the way they are administered in the knee.

TG-C is a cell gene therapy made by mixing allogeneic chondrocytes containing the transforming growth factor beta 1 (TGF-β1) gene. It is administered as a single injection into the knee joint and does not require surgery. When it was sold in South Korea under the name Invossa K Inj., the procedure cost about 4 million to 6 million won.

Cartistem is made from mesenchymal stem cells derived from neonatal umbilical cord blood. It requires surgery in which the knee is opened arthroscopically and the product is applied directly to the cartilage defect. Each vial costs 6 million to 8 million won, and one to two vials are used depending on the size of the damaged area.

The indications also do not overlap. TG-C targets moderate knee osteoarthritis that does not respond to conservative treatment. Cartistem targets International Cartilage Regeneration Society (ICRS) grade 4 cartilage defects caused by degeneration or repeated trauma.

What Was Used as the Control?

The point of divergence in the clinical designs was the control group.

Kolon TissueGene’s U.S. phase 3 trial used placebo as the control. According to the 12-month results disclosed by the company, the visual analog scale (VAS) decreased by 38.7 points in the treatment group and 39.2 points in the placebo group. The Western Ontario and McMaster Universities Osteoarthritis Index (WOMAC) improved by 27.61 points in the treatment group and 26.54 points in the placebo group. Neither measure showed a meaningful difference between the two groups.

Seung-ho Jeon, co-CEO of Kolon TissueGene, explained that “it is highly unusual for the placebo group’s improvement effect to persist for 24 months.” Intra-articular injection trials typically show a reduction in the placebo effect after 3 to 6 months.

Medipost used a hyaluronic acid injection as the control in its phase 3 trial in Japan. In other words, it compared Cartistem with a treatment used in actual practice. The company recruited 130 patients at 13 medical institutions and divided them into 59 patients receiving Cartistem and 61 receiving hyaluronic acid, followed for 52 weeks.

The results showed a p value of less than 0.0001 versus the control group for the WOMAC score and a p value of 0.0002 for improvement in the ICRS cartilage damage grade. Secondary measures, including VAS, IKDC and KOOS, also recorded p values of less than 0.0001. Structural cartilage improvement was confirmed in about 50% of patients who received Cartistem.

Seung-jin Lee, head of Medipost’s global business division, said, “The cartilage regeneration effect confirmed in the Korean phase 3 trial was reconfirmed through the Japanese phase 3 trial, establishing a firm foundation for Cartistem’s entry into the global market as a disease-modifying osteoarthritis drug (DMOAD) that has demonstrated structural improvement.”

Number of Clinical Trials Required by the U.S. Regulator

The scale of the assignments the two companies received from the FDA also differs.

Kolon TissueGene conducted two independent phase 3 trials. A total of 1,066 patients were enrolled in the two trials. The first trial, whose results were announced last month, was conducted at 27 sites, while the second trial, with results expected in October, was conducted at 35 sites.

Medipost agreed with the FDA to conduct only one phase 3 trial. The expected number of patients was reduced from 600 to 300. The design calls for recruitment and dosing over two years at more than 70 sites in the United States and Canada, followed by two years of follow-up.

In guidance issued in September 2023, the FDA stated that efficacy could be demonstrated with a single clinical trial and confirmatory evidence alone. Medipost secured acceptance of this pathway by submitting data from its Korean and Japanese phase 3 trials, along with real-world evidence from more than 550 Korean patients followed for more than 3 years.

Domestic Sales Records Have Already Diverged

The performance the two products have built outside the United States is not symmetrical.

Since receiving approval in South Korea in January 2012, Cartistem has been administered to more than 36,700 patients. It is supplied to more than 500 hospitals nationwide, and domestic sales in 2024 were 19.5 billion won.

Domestic sales of TG-C stopped in 2019. After an ingredient reported as cartilage-derived cells was found to be kidney-derived 293 cells, the Ministry of Food and Drug Safety revoked the product’s approval in July of that year. A lawsuit challenging the revocation has lost through the second trial and is pending before the Supreme Court.

The litigation did not end there. There are 53 damages claims against Kolon TissueGene and Kolon Life Science, totaling 104.1 billion won. Last month, in a lawsuit filed by 139 patients, the court recognized a product defect and ruled entirely in favor of the plaintiffs.

How Long the Money Can Last

The two companies also present different pictures in their ability to withstand the period after clinical development.

As of the end of March, Kolon TissueGene had 122.1 billion won in cash and cash equivalents. This comprised 94.9 billion won in cash and cash equivalents and 27.2 billion won in short-term financial instruments. Given that research and development expenses totaled 124 billion won last year, this is enough to last about 1 year without additional funding.

There are 147.5 billion won in outstanding convertible bonds (CBs). Of this amount, the 122.5 billion won issued in September last year carries both a coupon rate and maturity interest rate of 0%. Stonebridge Capital invested 50 billion won, Stick Investment 30 billion won, a consortium of IBK Capital and Caspian Capital 32.5 billion won, and Shinhan Venture Investment 10 billion won. The initial conversion price was 43,618 won per Korean depositary receipt (KDR).

Support from the parent company is also nearing its limit. Since 2021, Kolon has invested 266.1 billion won in Kolon TissueGene over 6 years. It also participated in a 60 billion won third-party allotment capital increase in March. As of the end of March, Kolon had 3.9 billion won in cash and cash equivalents on a separate-basis basis.

Medipost operates on a structure of earning and spending. Revenue last year was 73.6 billion won, up 4.2% from the previous year. The cord blood storage business accounted for 41.5 billion won, or 56.4%. Cumulative family cord blood storage exceeded 320,000 cases.

However, research and development expenses of 71.3 billion won consumed 96.9% of revenue, causing the operating loss to widen to 68 billion won. In December last year, the company raised funds for its U.S. phase 3 trial by issuing 205 billion won in CBs, with participation from SkyLake Equity Partners, Crescendo Equity Partners and others.

The Value Assigned by the Market

The stock prices moved in response to clinical results, not operating performance.

Kolon TissueGene’s share price rose to 149,000 won on May 12 before hitting the daily lower limit for three consecutive trading days after the clinical results were announced. The closing price on the 30th of last month was 11,670 won, with a market capitalization of 991.6 billion won. This was 92% below the peak.

The share price had already been falling from 4 days before the disclosure. It dropped 31%, from 90,000 won on the 10th of last month to 62,100 won on the 16th. Suspicions of an information leak arose after institutional investors were found to have been net sellers before the announcement. On the 27th of last month, the company announced that it would entrust analysis of the results of the second phase 3 trial to an external contract research organization (CRO).

The co-CEO of Kolon TissueGene said, “We will analyze the additional clinical data to be obtained in the future according to objective and rigorous scientific standards, without making any assumptions in advance.”

Medipost’s share price was 8,670 won on the 3rd, with a market capitalization of 327 billion won. The valuation of the company ahead in clinical development remains at one-third that of the company that failed. In effect, the remaining CBs and the parent company’s capacity to provide support are underpinning a substantial portion of Kolon TissueGene’s value.

Points to Watch Next Quarter

The hurdles the two companies must clear are on different timelines.

Kolon TissueGene will receive the results of its second phase 3 trial in October. In the first trial, 2 of 310 patients in the treatment group and 8 of 151 patients in the placebo group underwent joint replacement surgery. The company presented these figures as evidence of a disease-modifying effect. The FDA application schedule, which had been set for the first quarter of 2027, has effectively been pushed back.

Medipost will apply for Cartistem approval with Japan’s Pharmaceuticals and Medical Devices Agency (PMDA), under the Ministry of Health, Labour and Welfare, at the end of the year. Approval is targeted for 2027. Under an exclusive sales agreement with Japan’s Teikoku Seiyaku, the company has already received an $8 million upfront payment and will receive an additional $10 million upon approval. In won, these amounts are 11.5 billion won and 14.4 billion won, respectively.

U.S. approval is targeted for around 2031. While Kolon TissueGene receives its answer in October, Medipost will have to wait another 5 years. The clinical success and commercialization timelines are positioned in opposite directions.