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Corporate Espionage Alive and Well: Former Genentech Scientist Involved in $100 Million Insider Theft

This case highlights the need for a strong insider risk management program. While it’s not clear from publicly available information how documents were removed, there appears to have been a large scale effort to remove or copy Genentech documents and transfer them to JHL. Genentech could likely have mitigated this situation through the deployment of proper insider risk management controls and polices. These should have included deploying a data loss prevention (DLP) solution, proper tagging and classifying of critical assets and information, and monitoring and analyzing employee interactions with sensitive data. In addition, the defendants likely left a trail regarding their desire and intention to leave Genentech. This is a primary insider threat trigger and controls must be developed to identify this behavior as early as possible. This involves a combination of technical and physical controls as well as improving overall collaboration processes and procedures between organizational entities (HR, Legal, CRO, CSO, and CISO).  


Xanthe Lam, a former Principal Scientist at Genentech and her husband Allen Lam, both have pleaded guilty to conspiracy and other charges. In addition to the conspiracy charge, she also pleaded guilty to one count of conspiracy to commit computer fraud and abuse, one count of conspiracy to make false statements to a government agency, and one count of making false statements to a government agency. Allen Lam also pleaded guilty to four counts of filing false tax returns and one count of conspiracy to make false statements to a government agency.  


According to the Justice Department, founders of a Taiwanese drug company, JHL Biotech Inc allegedly recruited the Lams to steal trade secrets relating to four Genentech drugs. The founders, Raco “Racho” Ivanov Jodanov and Rose Lin were charged with conspiracy to commit theft of trade secrets, wire fraud, international money laundering and conspiracy to obstruct justice. Additionally, Jodanov was charged with theft of trade secrets, while Lin was charged with making false statements to which both pleaded not guilty to all charges.  


Jodanov and Lin were longtime employees at Genentech when they decided to start their trade secret scheme as early as 2008. In 2009, they recruited the Lams to steal confidential information from Genentech to a Taiwanese company called Eusol Biotech and then to JHL, which Jodanov and Lin co-founded in late 2011. From the scheme, Jodanov and Lin obtained “thousands of stolen documents” that aided them to “cut corners, reduce costs, solve problems, save time, and otherwise accelerate product development timelines” of biosimilar projects. It was reported that Genentech had spent at least $120 million developing the confidential procedures, assays and other know-how for their top four selling drug products that included three cancer drugs – Rituxan, Herceptin, Avastin plus a cystic fibrosis inhalation called Pulmozyme. 


The Jodanov and Lin then used Genentech documents to create JHL’s own standard operating procedures to apply for the good manufacturing practices certification for its plant. It set up a manufacturing factory in Wuhan, China. Additionally, they were able to secure a biosimilar licensing deal with a Paris-based drug developer Sanofi. The two allegedly defrauded Sanofi into a partnership to which Sanofi would gain rights to make and distribute the biotech’s Rituxan drug in China. Sanofi paid around $101 million, including an $80 million investment in JHL. JHL and Genentech came to a settlement in which JHL agreed to abandon the four biosimilar programs and destroy all related cell line materials. JHL then changed its name to Eden Biologics as a way to minimize their reputation.  


Contact ITMG to Develop Strategies and Protocols Designed to Help Your Company Mitigate Your Insider Risk

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This entry was posted on Wednesday, July 21st, 2021 at 9:30 pm. Both comments and pings are currently closed.