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Genentech To Pay $200M Over Patent

November 19, 1999

LOS ANGELES (AP) _ The University of California on Friday accepted $200 million from Genentech Inc. to settle a long-running patent dispute over origins of the company’s lucrative human growth hormone Protopin.

Genentech agreed to pay the university $150 million and contribute $50 million toward construction of a biological sciences research building on a new campus at San Francisco’s Mission Bay. Five researchers who worked on the growth hormone at UC will share $85 million of the payment to the university. Genentech, meanwhile, gets to name the building.

Genentech, which did not admit any wrongdoing, wanted to end the fighting, said company chairman Arthur Levinson.

``It’s old news and we are extremely pleased to put it behind us,″ he said.

Investors pushed shares up on the news. Genentech stock was up $5.50, or 6 percent, to $87.06 1/4 at 5:15 p.m. on the New York Stock Exchange.

``Stocks go up when things are resolved because investors don’t like uncertainty,″ said Joseph Zammit-Lucia, head of Cambridge Pharma Consultancy, which studies the biotech and pharmaceutical industries.

Genentech will report the loss as a one-time charge in the fourth quarter of this year, Levinson said.

The dispute goes back to 1978, when a group of UC scientists isolated the DNA for human growth hormone, which was eventually patented. One of the scientists later left for Genentech, taking a sample of the DNA.

UC claims the university’s sample led to Genentech’s development of a growth hormone drug to treat abnormally small children.

The company admits it had a sample of the DNA from UC, but maintains it didn’t use it to develop the drug.

The university, paid $2 million by Genentech for the DNA in 1979, sued in 1990, seeking hundreds of millions of dollars in lost license fees on Genentech’s drugs. The company had reported Protopin sales of more than $1.2 billion between 1985 and 1994.

A federal jury was unable to resolve the dispute. The settlement avoids a retrial was set for January.

The settlement reflects a shift by biotech and pharmaceutical companies away from the old model of developing, making and marketing their own drugs, Zammit-Lucia said.

``I think this is sort of symptomatic of the new issues that pharmaceutical companies are facing as the industry evolves,″ he said. ``As part of the learning process, this is moving forward. It also does highlight the importance of having clear strategies when you partner with external organizations.″

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