Genscript Biotech plunged in Hong Kong by the most in two months after its chairman was detained on suspicion of smuggling prohibited goods in and out of the country.
Zhang Fangliang, a co-founder of the Nanjing-based gene and cell therapy firm, has been arrested after a period under “residential surveillance,” the company said in a stock exchange filing late Sunday. The company also announced his resignation as chairman and non-executive director.
“In connection with the investigation on November 21, [the company] received from the family member of Dr. Zhang a copy of a notice of arrest issued by the Customs Anti-Smuggling Department in Zhenjiang [of Jiangsu province],” Genscript said in the filing. “[He] has been arrested for the suspected offence of smuggling goods prohibited by the import and export regulations.”
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Genscript shares tumbled 14.8 per cent to HK$10.74 at the close of trading on Monday, the most since a 17.3 per cent dive on September 22, a day after Zhang was placed under residential surveillance by the Chinese customs on suspicion of breaking the law. Some HK$605 million (US$78 million) of shares changed hands.
Two employees who had previously handled import and export activities of Genscript have also been arrested with Zhang, although no formal charges have been made against them, the company said in the Sunday filing. Genscript said its operations remain “normal.”
Customs officials had raided the company’s offices in Nanjing and Zhenjiang but had not provided any documents indicating his surveillance was related to his role at the company and its units, Genscript said at the time.
The investigation was related to the special inspections of the management of human genetic sources – organs, tissues and cells – by China’s ministry of science and technology along with related authorities, mainland Chinese media outlet Caixin reported in September.
China tightly regulates the export of such resources and their use by foreign organisations. Foreign organisations and individuals, as well as organisations directly controlled by them, are not allowed to collect or preserve China’s human genetic resources, and cannot provide such resources abroad, according to a State Council ruling in June 2019.
Zhang was previously the CEO and chairman of Legend Biotech, a Nasdaq-listed blood cancer treatment developer spun off from Genscript in June this year. Both his roles were taken away on November 9.
Legend has the backing of US drug giant Johnson & Johnson’s biotech unit Janssen Biotech, which in 2017 signed a US$350 million global collaboration and technology licensing deal with Genscript for its chimeric antigen receptor T-cell therapy.
Zhang, a 55 year-old industry veteran, has over two decades of experience in the biotechnology industry. Before co-founding Genscript in 2002, he was an associate principal scientist at New Jersey, US-based pharmaceutical firm Schering-Plough where he specialised in tumour biology research.
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