Genentech, MedImmune Settle Patent Dispute

Alex Lash

The Deal

June 12, 2008

Provided by The Deal

Genentech Inc. said late Wednesday it has settled a long-running fight with MedImmune Inc. over one of the cornerstone patents of the biotech industry.

The patent, Cabilly II, covers certain manufacturing methods for monoclonal antibodies, a type of bioengineered protein that Genentech of South San Francisco, Calif., has turned into several lucrative medicines, including the cancer treatments Avastin and Herceptin. MedImmune filed its original complaint in April 2003.

"Under the terms of the settlement agreement, the litigation, which was pending before the U.S. District Court for the Central District of California, has now been fully resolved and dismissed," said Genentech.

A Genentech spokeswoman declined to discuss how the settlement came to pass and financial terms weren’t disclosed.

In January 2007, MedImmune's case against Genentech was allowed to proceed by the U.S. Supreme Court. Genentech had argued that MedImmune, since last year a division of AstraZeneca plc, could not be a licensee of Cabilly and challenge its validity at the same time. The Supreme Court disagreed and let MedImmune fight on in a lower court. At the time, the Supreme Court did not rule on the merits of MedImmune's case.

Cabilly is important to Genentech financially but more so strategically. Revenues from licensing royalties -- mainly Cabilly II -- brought in $256 million last year. After payments to third parties it ultimately contributed about 8 cents per share to Genentech's bottom line. The company forecast royalty revenues growing 15 to 25 percent in 2008. Wednesday's settlement with MedImmune will not change that forecast, Genentech said.

Beyond the bottom line, however, the patent gives Genentech leverage in the industry, where monoclonal antibodies are playing a larger role in treating cancer and autoimmune disease. Because of the so-called "stack" of patents for antibodies, many companies are exploring new forms of antibodies and other proteins to attack the same diseases.

The patent takes its name from one of its inventor's last name. MedImmune of Gaithersburg, Md., licenses Cabilly II as part of its production of Synagis, a treatment for an infant respiratory virus. Other licensees include Abbott Laboratories for its best-selling rheumatoid arthritis treatment Humira.

Meanwhile, Cabilly II is also under a separate challenge at the U.S. Patent and Trademark Office. Officials there have overturned it, but Genentech can choose to appeal and draw the process out for years. If Genentech loses its current appeal, the PTO's oversight committee will take up the case. Cabilly II is set to expire in 2018.

Genentech shares were down 14 cents to $73.77 in after-hours trading Wednesday.