Medytox to demand 'enormous' compensation from Daewoong

Daewoong Pharmaceutical headquarters in Gangnam-gu, Seoul / Courtesy of Daewoong Pharmaceutical

By Nam Hyun-woo

As the long-drawn-out legal battle between Medytox and Daewoong Pharmaceutical over the origin of their botulinum toxin (BTX) strains leans toward Medytox's favor following an initial determination by the U.S. International Trade Commission (USITC), market interests are on the amount of compensation Medytox will demand from its archrival.

Though it remains uncertain whether the companies will reach an agreement before the USITC makes its final determination banning Daewoong's BTX business in the U.S., industry officials say Medytox is set to demand a “huge amount” of compensation from Daewoong, regardless of what happens in the next stage of their battle.

Earlier this week, USITC judge David Shaw recommended a 10-year ban on importing Daewoong's Nabota, marketed as Jeuveau in the U.S., based on the claim the company developed the product with a BTX strain stolen from Medytox.

Since this is a preliminary determination, the ban is yet to be effective until it is upheld by a final determination expected to come in November. Given the USITC's other cases, however, analysts and experts say the chances of reversing the initial determination are slim.

Daewoong and its U.S. sales partner Evolus expressed they “strongly disagree” with the determination, with Daewoong saying it will spare no efforts to reverse it.

As Medytox says it will “continue efforts to unveil the truth,” the USITC battle will likely see its end when the final determination is made.

If the USITC confirms its findings in the final determination, Medytox is expected to demand a huge compensation from Daewoong by expanding the coverage of the litigations to other courts.

Currently, Medytox has demanded Daewoong 1 billion won ($835,910) compensation under a civil suit at a domestic court. Given the sales of Medytox's BTX products, Meditoxin, reaching 112.7 billion won last year, a USITC determination that Daewoong stole Medytox's strains will provide the latter a chance to expand the compensation sharply.

Separately, Medytox filed a compensation suit with the Orange County Court against Daewoong in 2017 and faced a “dismissal without prejudice,” which means the company can refile the case in the future. Over the partial dismissal, Medytox said it is tantamount to a “stay” decision, dropping hints that it will refile the case against Daewoong with evidence submitted to the USITC.

Medytox said the pending suits against Daewoong will pick up speed as it will submit evidence used in the USITC case to other courts, and this will help them to draw a similar conclusion to the USITC's. Unsurprisingly, Daewoong said the USITC investigation does not have the legal weight of general judicial agencies, thus the USITC does not hold a respondent responsible for compensation or issue criminal charges.

Given the two companies' battle involves their respective U.S. partners ― Allergan with Medytox and Evolus with Daewoong ― the amount of compensation may grow further.

When Evolus was listed on the Nasdaq bourse in January 2018, the company told investors that it regards the dispute with Medytox as a risk, and is “entitled to indemnity” under its agreement with Daewoong.

On Thursday, a U.S. law firm Gibbs Law Group said in a press release that it is investigating a potential Evolus class action suit on behalf of investors who lost money in Evolus, following the USITC initial determination.

Another scenario is the two sides reaching an agreement aside the USITC battle, having Daewoong to pay a certain amount of royalties to Medytox for selling Nabota. However, industry officials say the chances of this are very slim, given the two sides' fierce battle so far.

“Since a settlement between complainant and respondent at the USITC should take place before the commission to make an initial determination, there will not be a settlement happening at the USITC,” an industry official said. “Besides that, there is a slim chance of both sides reaching a royalty agreement, but this also seems unlikely.”