Drug lawsuit against Genentech could burden customers

June 26, 2013 by SF EXAMINER

A legal spat that includes South San Francisco biotech giant Genentech has the potential to cost patients who need several drug treatments, including a handful for cancer treatment.

Citing derelict royalty payments on several drug treatments — including three for cancer — Nevada-based PDL BioPharma filed a notice of arbitration earlier this month against Genentech. The suit stems from a 2003 agreement that the two companies made over a patent dispute, which required Genentech to pay licensing fees to use PDL’s medical technologies.

Genentech has oft been touted as a leader in cancer treatment, creating antibody drugs that strike tumors while causing minimal damage to surrounding tissue. Its sought-after drug Herceptin, which fights metastatic breast tumors, is one of the drugs affected by the suit.

PDL claims Herceptin and a slew of other treatments rely on certain proprietary techniques for humanizing antibodies, some of which emerged from PDL’s Redwood City lab, where the company was located before it moved to Nevada in 2008. Over the past decade its lawyers have waged several court battles against Genentech, arguing that PDL should be entitled to revenues from drugs it helped generate.

Southwestern Law School associate professor Ryan Abbott and other legal experts say PDL no longer appears to be directly engaged in developing new medicines, and at this point it’s basically a patent business. Stanford law professor Hank Greely traces the shift to 2008, when the company likely sold or spun off most of its operations and moved out of San Mateo County.

Nonetheless, PDL has aggressively — and often successfully — fought the largest names in biopharma, using its patent portfolio as ammo. In 2009, it hired the audit firm KPMG to look at Genentech’s books, and it built a case that led to the current arbitration.

If judges at the American Arbitration Association in New Jersey side with PDL, then Genentech could be in the hole for more than $1 billion. PDL has also threatened to terminate its license agreement with the company, or a demand a flat 3.75 percent royalty on all future products that use the antibody technology. Nevada Judge David Hardy denied two of Genentech’s motions to throw out the case.

Undeterred, Genentech’s lawyers have said they will ask the Nevada Supreme Court to review motions in the case that required Genentech and its parent company, Roche, to produce financial documents. Barring a successful arbitration, the companies are set to go to trial in October. That could be delayed by several months if the Supreme Court decides to intervene.

A spokeswoman for the South San Francisco company said PDL’s arbitration claims are baseless, and that Genentech will defend itself “vigorously.”

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