Ex-Genentech staffers plead guilty to trade secrets theft as DOJ targets biotech partners for $101M Sanofi deal

Roche Genentech
Two staffers at Genentech have pleaded guilty to stealing trade secrets to help Taiwanese firm JHL Biotech develop biosimilars to the Roche subsidiary's key drugs. (Roche Genentech)

A lawsuit that charges ex-staffers at Roche’s Genentech with trade secrets theft nears closure as key insiders plead guilty. But federal prosecutors are now targeting their co-conspirators who allegedly used stolen proprietary knowledge on the drugmaker’s oncology blockbusters to win a large biosimilar deal with Sanofi.

Xanthe Lam, a former Genentech principal scientist, and her husband Allen Lam pleaded guilty to conspiring to steal trade secrets from the Roche subsidiary to aid competitors, the U.S. Department of Justice (DOJ) said Wednesday. The two also pleaded guilty to other criminal charges.

Now, the court may order the husband-and-wife team to cough up illegal gains or cover Genentech's losses depending on the final sentence, the DOJ said.

The two Genentech veterans stole confidential intellectual property related to the company’s top-selling cancer drugs Rituxan, Herceptin and Avastin, plus cystic fibrosis inhalation Pulmozyme, the government said. They then passed that info to Taiwanese firm JHL Biotech, now called Eden Biologics, to help it develop cheap copycats, according to the suit.

RELATED: Ex-Genentech staffer cuts plea deal in 'brazen' oncology trade secrets case

Meanwhile, as the Genentech moles near sentencing, the DOJ is turning its focus to other alleged players in the scheme.

Two JHL co-founders, ex-CEO Racho Jordanov and former chief operating offer Rose Lin, faced a new indictment from a federal grand jury in San Francisco, the DOJ said in a separate announcement Wednesday.

Both Jodanov and Lin were longtime Genentech employees and started the secrets theft scheme as early as 2008 while still with the company, the indictment says. They recruited the Lams in late 2009 to ferry confidential information out of the biologics giant first to a Taiwanese company called Eusol Biotech and then to JHL, which Jodanov and Lin co-founded in late 2011, the indictment says.

The two ex-JHL execs allegedly obtained “thousands of stolen documents” that helped them “cut corners, reduce costs, solve problems, save time, and otherwise accelerate product development timelines” of biosimilar projects, according to the indictment. Together, Genentech had spent at least $120 million developing the confidential procedures, assays and other know-how for those four products, the indictment said.

In one case, Jordanov and Lin allegedly used the Genentech documents to create JHL’s own standard operating procedures to apply for the good manufacturing practices certification for its plant.  

RELATED: Genentech settles fight over cancer drug trade secrets with Taiwan's JHL

But the real profit the pair gained was from a biosimilar licensing deal with Sanofi. In 2016, the two allegedly “defrauded” Sanofi into a partnership, in which the French pharma gained rights to make and distribute the biotech’s Rituxan biosim in China. In exchange, Sanofi paid about $101 million, including an $80 million investment in JHL.

Under a prior civil settlement with Genentech, JHL agreed to abandon those four biosimilar programs involved and destroy all related cell line materials. Marred by the reputation crisis, the small firm immediately revamped its C-suite and changed its name to Eden Biologics in February. The company is still developing biosimilars, with a copy referencing Amgen’s bone drug Xgeva the most advanced pipeline program. It’s also offering biologics CDMO services.

As for Genentech, the drugmaker’s cancer troika is suffering from serious biosim-related sales declines even without JHL’s products. U.S. biosims dealt a combined 1.6 billion Swiss francs ($1.75 billion) blow to Roche’s top line in the first quarter, as Rituxan, Herceptin and Avastin together brought in sales of 2.3 billion Swiss francs ($2.51 billion).