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Johnson & Johnson : Short seller accuses GenScript of CAR T data fraud

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09/28/2018 | 05:05am EDT

GenScript Biotech Corp. (HKSE:1548) shed HK$4.34 (27%) to HK$11.86 before halting trading Thursday after a report published by short seller Flaming Research accused the company of manipulating data and concealing safety issues during clinical development of CAR T therapy JNJ-68284528 (LCAR-B38M).

Flaming Research describes itself on its website as an organization founded by equity investors aimed at "exposing fraudulent companies to protect the interest of minority shareholders" on the Hong Kong stock exchange, although it also notes via a disclaimer that it holds short positions in the stocks covered in its reports.

The report accused GenScript and its Legend Biotech units of selectively disclosing the better data coming from one of the hospitals participating in a Chinese trial of JNJ-68284528, the Second Affiliated Hospital of Xi'an Jiaotong University.

At the 2017 American Society of Clinical Oncology (ASCO) meeting in Chicago, GenScript reported data from the first phase of the Chinese Phase I/II LEGEND-2 trial showing that JNJ-68284528 led to a 100% overall response rate (ORR) in multiple myeloma patients.

Flaming Research said it asked doctors at the Xi'an Jiaotong hospital to evaluate efficacy of CAR T clinical trials, and they reported a verbal ORR of 60-70%.

The report also claims to have uncovered variance from protocol design and procedures at the Chinese clinical trial sites. Among other safety issues cited, the report alleges doctors directly injected CAR T cells with normal syringes, rather than via IV, which damages cells and prevents effective control over how many cells get injected.

Furthermore, it alleged that GenScript deliberately concealed that severe cytokine storm caused a patient death during clinical testing to avoid having its trials and partnership with Johnson & Johnson (NYSE:JNJ) terminated.

Flaming Research's report also implicated J&J, saying the pharma did not practice "sufficient risk control" in reviewing the Chinese trial sites and data and questioning whether it did its due diligence before entering the deal.

J&J holds global rights to jointly develop and commercialize JNJ-68284528 with GenScript subsidiaries Legend Biotech USA Inc. and Legend Biotech Ireland Ltd. to treat MM. J&J signed the deal about six months after GenScript presented at the 2017 ASCO meeting (see "Car Dealing").

J&J spokesperson Brian Kenney told BioCentury the pharma conducted careful, detailed reviews of Legend Biotech's data and JNJ-68284528.

J&J began a U.S. Phase Ib/II trial of the CAR T therapy to treat relapsed or refractory MM in June this year, according to ClinicalTrials.gov.

In a statement, GenScript denied all of the allegations saying Flaming's report "comprises statements which are misleading, biased, selective, inaccurate and incomplete as well as groundless allegations and irresponsible speculations." The company added it "believes that Flaming's ultimate aims are to drive down the price of the Shares and undermine the Company's reputation." GenScript said it is considering legal action. Its Thursday stock move represents a market cap loss of about HK$58.8 billion ($7.5 billion).

JNJ-68284528 targets BCMA (tumor necrosis factor receptor superfamily member 17; TNFRSF17; CD269).

Flaming Research's allegations come on the heels of a vaccine safety scandal in China, which prompted State Administration of Market and Supervision Party Secretary Jingquan Bi and other officials to resign in August (see "Vaccine Volatility").

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(C) 2018 M2 COMMUNICATIONS, source M2 PressWIRE

Stocks mentioned in the article
ChangeLast1st jan.
GENSCRIPT BIOTECH CORP 2.57% 17.54 End-of-day quote.67.05%
JOHNSON & JOHNSON -0.42% 131.03 Delayed Quote.2.01%
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