Chinese Government Arrests GenScript and Legend Biotech Founder for Smuggling

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Two months after he was stepped down from the role of chief executive officer of Legend Biotech, Fangliang “Frank” Zhang has been arrested for smuggling genetic resources from the People’s Republic of China. Following the arrest, Zhang resigned from his position on the board of directors of Legend Biotech.

Zhang, who founded Legend Biotech in 2015 as a subsidiary of parent company GenScript, a company he also co-founded, had been under residential surveillance in connection with an investigation by the Customs Anti-Smuggling Department of Zhenjiang in China since Sept. 21. As of Monday, no charges have formally been made against Zhang, according to an announcement from Legend, but he was taken into custody in that country. In a statement issued Monday, Legend said following the arrest, Zhang agreed to resign from his role at the company “to avoid unnecessary distraction to Legend Biotech.”

Zhang’s arrest was for “the suspected offense of smuggling goods prohibited by the import and export regulations under the laws of the PRC,” according to a GenScript statement. In addition to Zhang’s arrest, GenScript said two employees who “previously handled import and export activities of the group” have also been arrested. Like Zhang, the two other employees have not been formally charged, GenScript noted in its announcement.

According to the South China Morning Post, the investigation into Zhang and the other GenScript employees are related to the “special inspections of the management of human genetic sources – organs, tissues and cells.” The investigation into the smuggling activities is being led by China’s ministry of science and technology along with related authorities. Human genetic goods are tightly regulated by the Chinese government. The Post reported that foreign organizations and individuals are not allowed to collect or preserve China’s human genetic resources. Also, those resources are not allowed to be provided for uses abroad, the Post noted, citing a report from China’s State Council.

Zhang stepped down from his two-month tenure as CEO of Legend Biotech in September after the company learned of his troubles in China with the Customs Anti-Smuggling Department. At the same time, Legend disclosed that some employees who had previously been employed by GenScript were questioned by Chinese authorities. It is unknown if those employees are the same ones who were arrested alongside Zhang. Legend said it did not anticipate any charges being brought against the company in relation to the arrest.

In addition to his roles at Legend, Zhang has also been the chairman, an executive director and CEO of GenScript, which he cofounded in 2002. Legend was launched to expand GenScript’s capabilities of developing a broad range of immunotherapy treatments. Zhang had served as the chairman of board of directors of Legend Biotech since 2015. Two years after its founding, Legend Biotech tied up with Johnson & Johnson to develop the anti-BCMA CAR-T therapy ciltacabtagene autoleucel (cilta-cel). Cilta-cel snagged Breakthrough Therapy Designation from the U.S. Food and Drug Administration last year and appears to be on track for a potential regulatory review as a treatment for multiple myeloma next year.

Li Zhu, chief strategy officer at GenScript Biotech, was tapped to fill Zhang’s place on the board. Before joining GenScript, Zhu worked at California-based Clontech Laboratories, Inc. as a director of molecular biology.  Zhu founded Genetastix Corporation, Inc., a biotech company focused on yeast-based antibody discovery, and served as president and CEO from 2000 to 2005.

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