Drug tycoon implicated in breach of trust
Friday, January 9, 2015
By John Liu, The China Post
Prosecutors conducted a search on the residence of Lin Rong-jin (林榮錦), the former chairman of pharmaceutical company TTY Biopharm Company (東洋製藥), on suspicion of hollowing out company assets.Prosecutors suspect Lin may have committed breach of trust and put him on bail for NT$5 million. Prosecutors also conducted a search of several companies formed by Lin after leaving TTY.
During his tenure as TTY’s chairman, Lin invested a lot of resources into developing specialty drugs, generic drugs and other new drugs. He successfully transformed TTY into an innovative pharmaceutical company, and even earned the nickname of “the biotechnology’s Lee Iacocca.”
Intellectual property such as drug formulas and production processes are considered trade secrets in the biotechnology industry. The focus of the prosecutors’ investigation will be on whether the former drug tycoon has unlawfully transferred patented technologies to other parties.
TTY Chairman Clark Hsiao (蕭英鈞) began taking legal action against Lin at the end of 2014. He claimed that Lin had transferred TTY’s patented technology related to breast cancer and ovarian cancer drugs to a Swiss company without charge. The action constitutes an irregular transaction and resulted in NT$400 million in losses for the TTY, Hsiao said.
Lin reportedly transferred the patented technology from Swiss INOPHA back to his own reinvestment business, emptying TTY’s assets in the process. In his defense, Lin said his actions did not result in any losses for TTY.
Share Prices of Biotechnology Take a Hit Yesterday
Biotechnology share prices took a hit in the wake of the litigation. Share prices of Center Laboratories Inc. (晟德), Mycenax Biotech Inc. (永昕) and PharmaEngine Inc. (智擎), all of which were formed by Lin, plunged on the opening of the stock market.
Center Laboratories’ price plummeted at the opening of the market, to close at NT$97.2, the lowest allowed level in a single trading day.
The price of TTY also dropped more than 6 percent yesterday. TTY declined to comment on the legal lawsuit, and maintained it has no impact on the company’s operation.
TTY had a good year in 2014. Its earnings in the third quarter exceeded those in the first and second quarters combined. The company also had a good run in the fourth quarter. Considering the reduction in costs, stable profitability, and stock selling, constitutional investors predict the company will have an earning per share between NT$2 and NT$2.5 in 2014.
With effective cost management, constitutional investors forecast good profitability for the company in 2015.
Dramatized Friendship in the Spotlight
The high-profile litigation also put Lin and Hsiao’s relations under the spotlight. The two were classmates at Taipei Medical University, and they entered TTY at the same time. Hsiao was a critical ranking officer at TTY while Lin served as the chairman.
However, the two disagreed on the company investment and expansion plans. Hsiao terminated many of Lin’s investment projects after he left the company.