Genscript, the Chinese company behind overnight CAR-T star Nanjing Legend Biotech, has seen its stock nosedive after a damning short report questioned its data integrity, R&D expertise, safety record and manufacturing capability.
The stock dipped as much as 47% on the Hong Kong Stock Exchange before trading was suspended at around a 26% loss — or $1 billion.
While Genscript has yet to issue an official response, the company told National Business Daily that the short report “contains multiple flaws that are inaccurate, and the company will publish a clarification statement as soon as possible.”
Once a virtual unknown contract research organization, Genscript came into the global spotlight when its subsidiary Legend presented some jaw-dropping results for its BCMA-targeting CAR-T at 2017 ASCO. Then J&J offered a high profile endorsement through its Janssen unit by handing $350 million upfront to partner on LCAR-B38M for multiple myeloma.
But according to the report written in Chinese and attributed to Flaming Research — an obscure firm whose website lists only one report on Tibet Water — Legend likely forged the data, and Janssen missed out on key due diligence in haste to catch up with Celgene as the two giants fight for dominance in multiple myeloma.
Here’s how they got to that conclusion: Legend’s CAR-T data came from three “well recognized hematology hospitals” in Shanghai and Jiangsu, and one mediocre hospital in Xi’an. But it was the researchers in Xi’an who offered the most compelling data, whereas the data from the other sites didn’t hold up.
“Given that Xi’an data were overall better than Shanghai data, choosing to selectively disclose Xi’an data is clearly fraudulent behavior,” the report reads. “Likewise, doctors in Shanghai have doubts about the Xi’an data: On one hand Legend was more concerned with treatment effects than safety, on the other the Xi’an hospital didn’t have sufficient record on safety data.”
The incident, widely reported by Chinese media, also raises questions about the volatility of the HKEX at a critical time as non-revenue biotechs start going public on the exchange.
Genscript the CRO was first listed in 2015 but got its big break this year in the wake of Legend’s stellar CAR-T results, surging as much as 500%. Now that its stock is closely tied to the performance of its biotech subsidiary, whatever happens here could serve as a cautionary tale for the pre-revenue biotechs that have only recently been allowed onto the city’s exchange.
The 14-page report starts with the thesis that it’s worth less than a quarter of its current price. Aside from issues with the data, it highlights a patient death that occurred at a Shanghai site in 2017, which Genscript disclosed but hasn’t followed up on, as an illustration of the therapy’s potential risk. It further attacks Frank (Xiaohu) Fan, Legend’s R&D chief, for his lack of credentials in drug development and the “serious challenges” he’s faced in applying for patents — in addition to the general lack of expertise in his team.
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