The prosecution raided two securities firms that managed the initial public offering of Kolon TissueGene in 2017, to know whether the two had known about the mislabeling of the now-suspended gene therapy Invossa-K before listing.

According to industry sources, the Criminal Affairs Division 2 of the Seoul Central District Prosecutors’ Office swooped on NH Investment & Securities and Korea Investment & Securities on Thursday morning.

The prosecutors were looking into whether the two brokerages offered legitimate valuations for Kolon TissueGene before the company went public.

Kolon TissueGene was listed on the secondary KOSDAQ market on November 6, 2017. After the Ministry of Food and Drug Safety approved knee osteoarthritis drug Invossa in July 2017, TissueGene drew much attention as the original developer of the drug around the time of the IPO.

However, Kolon Life Science, the parent company of Kolon TissueGene, revealed in April that it had mislabeled the cell ingredient of the second fluid of Invossa as cartilage-derived cells instead of kidney-derived ones when it submitted data to the drug regulator.

The main bourse operator decided on Saturday to review whether to keep Kolon TissueGene on the KOSDAQ market, as it suspected that the company falsely wrote or omitted a significant piece of information in the securities registration statement submitted to the regulator for listing.

The prosecutors searched the two brokerages, suspecting that they went ahead with the IPO even though they had been aware of the mix-up of the kidney-derived cells in Invossa.

Receiving the food and drug safety ministry’s complaint, the prosecutors raided Kolon Life Science and Kolon TissueGene’s Korean branch in early June. On July 2, they summoned an executive at Kolon TissueGene.

The prosecution is investigating whether Kolon breached the Pharmaceutical Affairs Act, the Capital Market Act, and the Act on Aggravated Punishment of Specific Economic Crimes.

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