The rollercoaster ride continues for China’s cell therapy sector

Companies like Nanjing Legend and Cellular Biomedicine Group continue to attract major financial endorsement from Western big pharma, but the threat of scandal is seemingly never far away.

Does Chinese biotech have a credibility problem? Yesterday Nanjing Legend, which had scored a $350m up-front payment from Johnson & Johnson in December, suffered the ignominy of having its credibility questioned in an anonymous report, causing a suspension of trading in its holding company.

On the other hand, after signing a key deal with Novartis yesterday Cellular Biomedicine looks perfectly placed to become a low-cost, FDA-compliant manufacturer of Kymriah. But Cellular Biomedicine is itself no stranger to controversy.

The company first came to prominence in 2015 when it reported findings from leukaemia patients treated with its CD19-directed CAR-T therapy that were as good as Western rivals’. However, shortly afterwards it came under fire from an anonymous Seekingalpha article alleging that it had concealed patient deaths and used paid stock promoters.

The claims were sufficiently threatening for the group to issue a denial, defending its investor relations practices and opening itself up to independent scrutiny. Inevitably, however, a class action lawsuit followed.

The group, which is listed on Nasdaq, swept away many of these doubts after Novartis yesterday invested $40m in it at a $440m valuation. The Swiss firm looks to have chosen Cellular Biomedicine as its vehicle for manufacturing and launching Kymriah in China, mirroring a deal Juno, now owned by Celgene, struck with Wuxi Apptec in 2016.

It might also be the case that Novartis, seeing how tough it is to make money out of CAR-T given Western manufacturing costs, will in time seek to use China as a global low-cost production base. A separate aspect of the tie-up has the Swiss firm licensing rights to undisclosed Cellular Biomedicine CAR-T projects, though little in the pipeline looks groundbreaking.

Cellular Biomedicine's CAR-T assets
Project Antigen Indications
Phase I
C-CAR011 CD19 NHL, ALL
CBM-CD20.1 CD20 NHL, CLL
CBM-CD30.1 CD30 Hodgkin lymphoma & NHL
Anti-EGFR CAR EGFR NSCLC, colorectal & ovarian cancers
Preclinical
Anti-CD22 CAR CD22 ALL
BiCAR Research Program GITR, H2 receptor AML
CD20-CD19 Bispecific CAR CD20, CD19 NHL, CLL
Anti-BCMA CAR BCMA Multiple myeloma
NKG2D CAR NKG2D AML
Source: EvaluatePharma, company filings, Edison Investment Research.

Investors will hope that Novartis conducted extensive due diligence into Cellular Biomedicine before signing on the dotted line. Still, similar validation from J&J has not helped Nanjing Legend avoid controversy.

Nanjing licensed its BCMA-targeting CAR LCAR-B38M to J&J for $350m, giving credibility to the highly positive data it had revealed in a surprise Asco late-breaker last year (Asco – Mystery Chinese group gives Bluebird a run for its money, June 5, 2017).

At the time questions arose over the reliability of a trial conducted in Asia and the relevance of the relatively early-stage patients treated. J&J is now developing JNJ-68284528, an asset based on Nanjing’s technology.

But now Nanjing has been plunged back intro controversy. An anonymous research report, purporting to have originated from a whistleblower inside the company, has accused Nanjing of cell handling violations and, most seriously as far as the Asco data are concerned, of inaccurate follow-up patient assessments, which could have affected the impressive response rates cited in the trial.

Nanjing is a subsidiary of Genscript Biotech, a Hong Kong-listed company, whose stock was suspended for most of yesterday after first falling 20%. This morning it was back up 11%, and worth around half its value at the end of 2017.

In its rebuttal of the allegations today Genscript said it not only disclosed all data on the 74 subjects it had treated, but also that the results had been submitted for scrutiny to the US FDA. The key to Cellular Biomedicine regaining credibility was US certification of its manufacturing, and Nanjing too could find that little short of a US regulatory blessing of its data will do.

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