Genentech offers to pay $200 million settlement

University says patent on drug was infringed

November 17, 1999|By BLOOMBERG NEWS

SAN FRANCISCO -- Genentech Inc., the world's No. 2 biotechnology company, has offered to pay $200 million to settle claims it violated a University of California patent in developing human-growth-hormone drugs, people familiar with the matter said.

The proposed settlement comes more than five months after a San Francisco jury fell one vote short of finding that Genentech infringed on UC's patent for the human-growth-hormone drug Protropin. A majority of Genentech is owned by Swiss drugmaker Roche Holding AG.

If approved by UC's Board of Regents, the proposed settlement will keep Genentech out of a court battle over two of its best-selling products, the growth hormones Protropin and Nutropin. The board is seeking up to $2.8 billion in damages in a lawsuit against Genentech.

"It's better for shareholders to have Genentech put this lawsuit behind it," said Carol Werther, a biotechnology analyst with Adams, Harkness & Hill.

Genentech has more than $1 billion in cash it can use to make the payment. Still, the proposed settlement is more than the $182 million in net income the South San Francisco, Calif.-based biotech company reported for 1998.

"It's a significant amount of money, but Genentech can afford it," Werther said.

Genentech spokeswoman Laura Leber said the two sides are still in negotiations and that "no final settlement" has been reached. She declined to comment on the settlement figure.

Genentech shares rose $4.375 to $76.125 on the New York Stock Exchange yesterday.

UC's Board of Regents is expected to consider the offer at meetings tomorrow and Friday. The settlement figure was contained in a memo distributed to staff members on both sides of the case yesterday, according to one of the people familiar with the matter.

The dispute has drawn widespread interest because Genentech, founded in 1976, is the oldest biotechnology company and a powerful competitor in the global pharmaceutical industry. Sales of its growth-hormone drugs, including Protropin and Nutropin, accounted for $214 million of Genentech's 1998 revenue of $1.15 billion.

The trial, at which a jury deadlocked in June, focused on Protropin, one of several drugs Genentech produces to treat children who fail to grow normally because they lack sufficient growth hormones. The nine-member jury voted 8-1 in favor of the university.

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