Ex-Genentech Workers Charged With Stealing Secrets to Taiwan

(Bloomberg) -- Former employees of Genentech, led by a principal scientist, were charged by the U.S. with stealing trade secrets from the company to help Taiwan-based JHL Biotech Inc. sell similar drugs.

Xanthe Lam, a principal scientist at the Roche Holding AG unit from 1986 until last year, conspired -- along with her husband, Allen Lam, who also worked for the company and with a family friend, John Chan, who she helped to get hired by JHL -- to steal trade secrets related to the biopharmaceutical Pulmozyme and Roche’s top-selling cancer drugs Rituxan, Herceptin and Avastin, according to an indictment filed Oct. 25 and unsealed Monday.

The charges were filed as China has become a much needed consumer of the drugs. As sales of some of the pharmaceuticals fall in Europe due to cheaper formulations known as biosimilars, demand in China has picked up, Daniel O’Day, Roche’s pharma chief, said Oct. 17.

According to the indictment, JHL Biotech is also making biosimilars of the Genentech drugs. JHL Biotech, which was founded in 2012, is planning a Hong Kong IPO as soon as next year, Bloomberg News reported in July.

Xanthe Lam also allowed a fourth conspirator, James Quach, to gain access to Genentech documents to steal the company’s proprietary manufacturing protocols, prosecutors said. All four defendants were arraigned Monday before a federal magistrate judge, pleaded not guilty, and were released on bond, according to the U.S. Attorney’s Office in San Francisco.

Protected Data

In 2013, Xanthe Lam spent four weeks at JHL facilities in Taiwan with her Genentech-issued laptop, which gave her access to protected data, according to the indictment. She didn’t get approval from, or tell her Genentech managers about her time at JHL, according to the filing.

After she returned “she continued downloading, collecting, and transferring Genentech confidential documents relating to formulation development and raw material management,” prosecutors said in the filing.

Xanthe Lam, Allen Lam and Chan face as long as 10 years in prison if found guilty of trade secret theft, while Quach faces as many as five years in prison, according to a statement from prosecutors.

Genentech Suit

“We don’t think the government will be able to sustain the charges” against Xanthe Lam, her lawyer William Osterhoudt said Monday. “She is a brilliant scientist and has patents in her own name. She has been working hard to develop medicines to help people. We think this is not a good case.”

Lam, who was about to retire when she was charged, and the co-defendants “didn’t steal any trade secrets,” Osterhoudt said. “We’re looking forward to defending them.”

A lawyer for Chan said he was “frankly surprised” his client was indicted. “I thought at most he was a witness,” said John Runfola. “I am confident we will be able to prove his innocence. He just got his Ph.D. from the University of Sydney and got a job with the help of his father’s friend. The government sees some grand conspiracy.”

Genentech filed a separate civil suit making similar allegations in San Francisco federal court.

“Dishonest and illegal actions such as these threaten scientific innovation, obstruct fair competition, and undermine the hard work of our employees and people throughout the industry who act with integrity and in the best interests of patients every day,” Roche said in an emailed statement.

The case is U.S. v. Xanthe Lam, Allen Lam, John Chan and James Quach, 18-cr-00527, U.S. District Court for the Northern District of California (San Francisco).

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