Korean court rules Daewoong poached Medytox’s botox strain

A South Korean court on Friday ruled in favor of Medytox Inc. in a civil lawsuit against its crosstown rival Daewoong Pharmaceutical Co. over the source of its botulinum toxin, more commonly known as botox.

The Seoul Central District Court accepted Medytox’s claim filed in 2017 that Daewoong’s botox strain originated from that of Medytox, the companies said.

The court ordered Daewoong to turn over its botox strain to Medytox, discard all finished and semi-finished botox products made with the strain and pay Medytox 40 billion won ($32 million) in damage compensation for infringing upon its competitor’s trade secrets.

Following the ruling, shares of Medytox surged by the daily limit of 30% to close at 173,600 won on Friday. Daewoong’s shares finished 19% lower at 124,200 won.

“The court ruling is a clear judgment that Daewoong misappropriated our trade secrets,” said a Medytox official. “Based on this ruling, we will step up our efforts to protect our rights.”

DAEWOONG TO APPEAL TO HIGHER COURT

Daewoong, however, said it disagrees with the court ruling and will seek for a suspension of the court order's enforcement. It will also appeal the case to a higher court, a company official said.

In October 2017, Medytox lodged a complaint with a local court against Daewoong, claiming that the competitor poached its botox strain to make Nabota, a Daewoong product.

But Daewoong has denied the claim, saying it independently obtained its strain from Korean soil.

In January 2019, Medytox also took the case to the International Trade Commission (ITC).

The ITC initially ordered a 21-month ban on imports of Daewoong’s botox product but later invalidated the ruling following a negotiated settlement of the matter between the two companies.

Under the settlement, California-based Evolus, the global distributor of Daewoong’s Nabota, offered $35 million in license fees, and a 16.7% Evolus stake to Medytox.

Daewoong has been selling Nabota in the Korean market since 2014 and exporting the product to 62 countries, including the US.

As of the third quarter of 2022, Nabota’s sales stood at 107.9 billion won, accounting for 32.5% of the company’s total sales revenue.

If the court does not accept Daewoong’s request for the suspension of the order's implementation, the company's Nabota production activities will be put on hold, industry watchers said.

HUGEL’S SHARES ALSO PLUMMET

Meanwhile, Medytox is also waging a legal dispute over its botox strain against another Korean pharmaceutical company Hugel Inc.

In March 2022, Medytox filed a complaint with the ITC, asking the US trade panel to look into its claims and impose an import ban on Hugel’s botox product, Letybo, into the US.

On Friday, shares of Hugel fell 18.2% to 133,800 won following the court ruling on Daewoong.

Established in 2001, Hugel is Korea’s largest maker of botulinum toxin products used to treat overactive muscles and facial wrinkles. The company controls about half the Korean botox market.

Write to Jae-Young Han and Hyun-Ah Oh at jyhan@hankyung.com

In-Soo Nam edited this article.