A sharp 40% rally that seemed to signal a new valuation upswing instead marked the final chapter of the previous rebound. After spending two months pushing its share price back to a high of $37.50, Legend Biotech (NASDAQ: LEGN) then took another two months to tumble back below $20, erasing all gains from April and May.
Observed by this publication, the stock hit a temporary peak of $37.50 on June 3. While there was a three-day technical pullback due to overbought signals, market sentiment remained high. On June 8, the stock formed a long lower shadow before touching the middle Bollinger Band, supported by buyers, and then rallied for three consecutive days. Just as investors expected the stock to break through its previous high in an upward volatile trend, three bearish catalysts emerged within two months, abruptly ending the rally and causing the stock to give back all its gains from the prior two months, with a maximum decline of 51.12%.
From Discounted Offering to CEO Departure
Between June 16 and August 3, there were three distinct phases of decline for Legend Biotech shares, occurring on June 18, July 15, and July 27. These dates correspond to three negative events during this period.
On June 18, the stock plummeted 16.68% to close at $27.93, slashing the company's market cap from $6.226 billion to $5.188 billion, a loss of nearly $1 billion in a single session. Just days earlier, on June 14, Legend Biotech had presented impressive data at the EHA Congress for its in vivo CAR-T therapy, LB2501, in patients with relapsed/refractory B-cell non-Hodgkin lymphoma (R/R B-NHL), achieving a 100% overall response rate (6/6) and an 83.3% complete response rate (5/6). This early-stage data was top-tier in the NHL CAR-T field.
These promising clinical results boosted confidence in the company's second growth curve, but they also set the stage for a key catalyst for the short-term selloff: a discounted offering. On June 18 before the market opened, Legend Biotech announced a public offering of 7.7 million ADSs at $29.35 per share, a 12.4% discount to the previous close of $33.52, aiming to raise approximately $226 million. Underwriters were also granted a 30-day option to purchase up to an additional 15% of the shares. The company stated the proceeds would be used for pipeline research and development.
Given the rapidly scaling core commercial product, Carvykti, and the strong data for the in vivo CAR-T candidate, the offering was clearly intended to accelerate pipeline development, particularly for LB2501, and build a second growth driver. However, even with the stellar clinical data, U.S. investors reacted negatively. The reasons were twofold. First, as of the 2025 annual report, the company had $835 million in cash and was projected to achieve profitability in 2026. Second, with the first-half 2026 earnings report imminent, the decision to conduct a dilutive offering at a more than 10% discount before the release was seen as bad for market sentiment. As a result, the stock gapped down on June 18, closing at $27.93, below the offer price.
Trading volume surged to 13.6084 million shares on June 18, indicating significant internal disagreement over the offering. Comparing the chip distribution from June 17 and 18, while some positions built up at higher levels and above the $34.9 resistance faded, the number of shares clustered around the $27.93 level increased significantly, suggesting many investors saw the decline as a buying opportunity. Their key rationale remained the expected ramp-up of Carvykti sales in the second quarter of 2026.
This sentiment began to shift after July 27, when Legend Biotech announced that CEO Ying Huang would resign from his roles as CEO and director. At that time, Johnson & Johnson had already reported Carvykti's second-quarter 2026 sales of $657 million, a 49.4% year-over-year increase, and first-half sales of $1.254 billion, up 55.1%. Despite previous market doubts, the drug continued to accelerate. Huang's departure caused significant short-term market disruption because he was the key leader who had guided Legend Biotech from clinical-stage development to global commercialization. The impact on investor confidence was reflected in the stock's volume and chip movement. On July 27, trading volume again exceeded 10 million shares, reaching 10.0709 million. The stock gapped down, and the previously concentrated chips in the $27.6-$29 range significantly decreased, replaced by a large number of shares appearing above $21.37 and at the bottom around $18.
Johnson & Johnson's Stance: A Key Determinant of Market Confidence?
While the discounted offering and CEO departure were the two major negative catalysts, Johnson & Johnson's second-quarter earnings report and its management's commentary during the conference call were also crucial factors influencing market confidence in Legend Biotech.
On July 15, Legend Biotech shares fell sharply within the first hour of trading, with losses widening from near the flat line to around 10% before recovering somewhat to close down 10.25%. On that day, partner Johnson & Johnson reported its second-quarter 2026 results and disclosed Carvykti's global sales of $657 million for the quarter. This performance was largely in line with market expectations. A likely reason for the sharp decline was a comment from a J&J executive during the conference call, stating that J&J's wholly-owned bispecific antibody combination, Tecvayli + Darzalex, has "potential for cure" in second-line multiple myeloma.
The implication was that within J&J's second-line multiple myeloma strategy, the Tecvayli + Darzalex combination holds a similar position to Carvykti, significantly weakening the market's expectation of Carvykti's exclusive position. This is not the first time Legend Biotech has been impacted by its partner. In early December of the previous year, just as Legend Biotech's stock was beginning a rally, Johnson & Johnson delivered a significant blow. On December 9, J&J presented Phase 3 MajesTEC-3 clinical data for its self-developed BCMA/CD3 bispecific antibody (Tecvayli) combined with CD38 monoclonal antibody (Darzalex) at the ASH 2025 Annual Meeting. The primary endpoint showed a 36-month PFS rate of 83.4% for the Tec-Dara combination group versus 29.7% for the control group (DPd/DVd). The median PFS for the control group was 18.1 months, but it was not yet reached for the Tec-Dara group, with a hazard ratio (HR) of 0.17, significantly reducing the risk of disease progression.
Notably, compared to Legend Biotech's BCMA CAR-T therapy, Carvykti, the CARTITUDE-4 study from 2024 showed a 30-month median PFS rate of 59.4% after 34 months of follow-up, which was now lower than the Tec-Dara combination's data. Furthermore, the Tec-Dara combination had already surpassed Carvykti's 34-month follow-up data of 84.6% response rate and 76.4% OS rate, while maintaining a similar rate of minimal residual disease negativity. Since the Tec-Dara combination is an off-the-shelf product and a 100% J&J-owned asset, the market feared that J&J might have a "interest-driven resource allocation" bias towards this combination therapy, which was one reason for the previous impact on Legend Biotech's valuation and stock price.
However, from a market perspective, Carvykti is a one-time cell therapy, while Tecvayli + Darzalex is a continuous treatment regimen, targeting different patient populations. Both Carvykti and the Tec-Dara combination are key bets for J&J in the multiple myeloma market; strengthening with both products would solidify J&J's market advantage. As J&J management also clearly stated in the conference call, the goal is for about 80% of multiple myeloma patients to use at least one J&J product during their treatment. This suggests that Carvykti, which still maintains nearly 50% quarterly sales growth, remains one of the fastest-growing oncology assets in J&J's MM portfolio, and J&J has no incentive to undermine its commercial potential. From Legend Biotech's perspective, after this latest sharp decline, its price-to-sales valuation is only 3.51 times, far below the industry average of 9.47 times, making it an attractive proposition for long-term bullish investors.
Comments