Some pharmaceutical companies are facing production disruptions and management instability due to a series of legal violations and internal conflicts.
**Korea Union Pharm**
A legal battle between former and incumbent managers is intensifying at Korea Union Pharm.
(Credit: Getty Images)
According to the company's public filing on Monday, former CEO Yang Tae-hyun, who is currently serving as an inside director after being dismissed as a co-CEO, filed a lawsuit against current CEO Baek Byung-ha, three related parties, and three outside directors-auditors on charges of breach of duty under the Act on Aggravated Punishment for Specific Economic Crimes.
According to the complaint, the charges amount to about 4.3 billion won ($3 million), or 14.15 percent of the company's equity capital of 30.3 billion won. Korea Union Pharm said the amount has not yet been finalized and may change, depending on the outcome of future investigations by law enforcement agencies.
On the same day, Yang also applied for a preliminary injunction against the exercise of voting rights with the Suwon District Court’s Seongnam Branch in connection with an extraordinary general meeting of shareholders scheduled for Dec. 20. The application targets shares held by four people, including Chairman Baek, and seeks to block the exercise of voting rights for Baek's total holdings of 720,556 shares, as well as a certain Mr. Ahn's 285,242 shares, a certain Mr. Shin's 408,500 shares, and a certain Mr. Kim's 160,000 shares.
The ongoing dispute has caused the financial authorities to examine Korea Union Pharm’s eligibility for listing by Kosdaq market listing regulations. That also poses a potential risk to the company's listing status.
“We will take action by due process and cooperate with the investigation by the relevant authorities,” the company said in the public disclosure. “We will also respond to the request for a preliminary injunction against the exercise of voting rights by legal procedures.”
In addition to management disputes, the pharmaceutical industry faces administrative penalties for violating laws and regulations.
**Cho-A Pharm**
On Tuesday, Cho-A Pharm announced that production at its plant in Haman, South Gyeongsang Province, was suspended after the Haman County Office issued an administrative penalty for installing and operating an unauthorized wastewater discharge facility.
The suspension violates the Water Environment Protection Act, as the company was found to have operated an unauthorized facility that exceeded the applicable standards for wastewater discharge facilities for certain water hazardous substances within the restricted area for installing discharge facilities. The facilities subject to closure include medical substance and drug manufacturing facilities (44.61㎡/day) and other food manufacturing facilities (6.1㎡/day).
The suspension of production will take effect on Jan. 24, 2025, and the time of reopening has not yet been confirmed. The facility's annual sales account for 74.7 percent of the company's total sales (about 47 billion won), so the impact will likely be significant. The actual amount of revenue loss will be determined later in proportion to the duration of the production stoppage. The company will provide further details in an additional disclosure once the key changes are finalized.
“We will cooperate with the local government to complete the necessary remediation work as soon as possible while complying with relevant laws and administrative procedures,” Cho-A Pharm said in the announcement. “Products and goods manufactured before the date of production suspension can be distributed and sold, and sales and distribution operations will remain normal.”
**Kukje Pharm**
Kukje Pharm was sanctioned for violating the Pharmaceutical Affairs Act. According to the company's announcement on Monday, it received an administrative penalty notice from the Ministry of Food and Drug Safety last Friday. Accordingly, the manufacturing of tablet formulations at its plan in Ansan, Gyeonggi Province, will be suspended for 15 days.
The sales of the tablet dosage form were estimated at 48.8 billion won in 2023, accounting for 36.04 percent of the total sales of 135.4 billion won. However, Kukje Pharm plans to continue its normal business activities during disposal.
“Products manufactured and shipped before this administrative penalty can be distributed and sold normally,” the company said in the public disclosure. “We will minimize the impact by securing sufficient inventory for the suspended items.”