Legend Biotech Names Interim CEO Amid Investigation by Chinese Government
On Friday morning, Genscript Biotech, the parent company of Legend Biotech, mysteriously halted trading of its shares on the Hong Kong Exchange. On Monday, the reason for the trading halt was revealed. Legend’s stock prices took a tumble of over 15% when news broke that the Customs Anti-Smuggling Department of the People’s Republic of China (PRC) had raided two of Genscript’s locations and Legend’s office in Nanjing. Legend’s CEO and Board Chairman, Fangliang “Frank” Zhange, was also placed on “residential surveillance” by PRC law enforcement.
At this time, the investigation is believed to be related to suspected violations of import and export regulations under the laws of the PRC. Authorities also questioned several Legend staffers who had previously been employed by Genscript. As of now, no charges have been filed against any entity or individual.
It is unclear if the questioning or residential surveillance of Zhang relates to his roles at Legend or his previous roles as chairman and CEO of GenScript. Zhang only recently took over at Legend as Chief Executive Officer when the previous CEO, Dr. Yuan Xu, stepped down early last month for “personal reasons”.
Xu had been making major strides for the company, having just finished taking them through a massively successful IPO. Hopeful for a cool $100 million, Legend raised $487 million in June under Xu’s leadership to help fund the advanced pipeline for their anti-BCMA therapy. Her resignation seemed sudden, announced over a weekend.
On an interim basis, Legend’s CEO position will be filled by current Chief Financial Officer Ying Huang. Huang, who joined Legend in July 2019, is considered a top-ranked biotechnology analyst on Wall Street and will fulfill both CEO and CFO roles for now.
“As we await clarity from the authority, Legend Biotech remains focused on our path forward with upcoming regulatory and data milestones for cilta-cel and IND application for LB1901 being accessed in T-cell lymphoma, in addition to our internal pipeline. I am committed to ensuring that our company remains focused during this important time,” Huang said in a Monday statement.
Partner Johnson & Johnson put Legend on the biotech radar back in 2017 when they paid $350 million upfront for a global license for the company’s anti-BCMA CAR-T therapy ciltacabtagene autoleucel (cilta-cel). The drug was granted a breakthrough therapy designation by the FDA back in December, and just last month received the same designation from China’s National Medical Products Administration and the Center for Drug Evaluation. This designation is meant to speed up the approval of novel therapies that treat serious illnesses for which there is no cure or treatment, provided there is preliminary data showing they are better than existing options.
While no official charges have been made public yet, the basis of Legend’s work in gene and cell therapy may give some insight into the investigation due to relatively recent changes to China’s regulating.
China’s grip on the import and export of human genetic resources (HGR) has been tight since regulations were passed back in 1998. Last June, new regulations further tightened their control on the collection and use of HGR by foreign entities. Companies like Legend cannot collect or store Chinese HGR and instead must work with a Chinese partner and go through a series of hoops to obtain government approval for scientific research.
Under this updated regulation, unauthorized collections of such materials can face fines of up the $1.4 million and the threat of a permanent blacklisting from the field to individuals and entities violating the law. AstraZeneca and WuXi AppTec were among several companies dinged back in 2018 when found in violation of the 1998 version of the law, which was less stringent and defined.
Meanwhile, until further information on the investigation is disclosed, Legend said its operations have not been disrupted and are continuing as normal.
Johnson & Johnson said in a statement, “As it relates to cilta-cel, our focus in the ongoing global clinical development and advancing this novel BCMA CAR-T therapy towards future data and regulatory milestones.”