Editor

As everybody in the biotechnology 'hood knows, big dogs can fight longer than smaller dogs - and Genentech Inc.'s legal scrap with Amgen Inc. over the way Amgen makes the blockbusters Neupogen and Neulasta dragged on for almost seven years.

Genentech claimed the processes infringed on its patents, and not until the end of last month did the pair settle their differences, agreeing that Amgen would pay an undisclosed amount estimated by analysts at about $150 million.

"This was a long litigation and there were countersuits," said Stephanie Ashe, spokeswoman for Genentech. "This is a way to put it all behind us." Under the terms, Amgen makes a one-time payment and takes no license from Genentech.

Matthew Geller, analyst with CIBC World Markets Corp., said his "best guess is that Amgen is sharing the pain" with Japanese partner Kirin-Amgen and with European partner Roche Holding AG to the tune of about $55 million, which would mean Amgen is forking out about $95 million.

The long-term impact on both companies will be limited, Geller said, adding that although both sides battled hard in a case with many twists and turns, the outcome was not surprising.

Not only does the settlement show that "even a strong legal group like Amgen's realizes you can't flout patents," he said, but it adds value to companies such as Protein Design Labs Inc. and Human Genome Sciences Inc., which depend especially strongly on their intellectual property portfolios - "the lifeblood of the industry," Ashe noted.

Genentech also has a dispute going with PDL over the recently approved asthma drug Xolair (omalizumab), with the former saying PDL's patents don't cover Xolair and therefore the firm is not entitled to royalties. Xolair is a monoclonal antibody that targets immunoglobulin E and is the subject of a three-way deal with Houston-based Tanox Inc. and Novartis Pharma AG, of Basel, Switzerland. (See BioWorld Financial Watch, Aug. 25, 2003.)

In the Amgen vs. Genentech case, specifically at issue were the processes used in making Neupogen (filgrastim) and its longer-acting version, Neulasta (pegfilgrastim), both of which are indicated for decreasing infection during chemotherapy. In 2000, the District Court of California ruled that Amgen did not infringe on Genentech's patents, but last year the appeals court remanded the case back to California.

Winton Gibbons, analyst with William Blair & Co., said the two are not natural rivals. "Amgen is more of a growth factor company, and Genentech is becoming more of a therapeutic antibody company," he said. But the skirmish was practically inevitable.

"Genentech has an enormous patent estate," Gibbons pointed out. "Is it probable there will be other companies in the future that run afoul of Genentech and have to license technology from them? I would say it's very likely."

Often described as the premier biotech company and a frequent newsmaker, Genentech seems hardy. Just-released July sales figures for Rituxan (rituximab), the non-Hodgkin's lymphoma therapy, hit $100.3 million, according to IMS Health, and Herceptin (trastuzumab) for breast cancer reached $30.1 million for the month.

Earnings by Genentech in the most recent quarter were typically satisfying, and investors are still buoyed by the positive Phase III data with Avastin (bevacizumab) disclosed in June. The risk lies in Tarceva (erlotinib), for which Phase III data are due this year in front-line treatment of non-small-cell lung cancer (Genentech and partner OSI Pharmaceuticals Inc. began a Phase II trial in August with Tarceva against brain cancer), and the psoriasis drug Raptiva (efalizumab), for which an FDA panel meeting is slated for this week.

Many analysts expect the Dermatologic and Ophthalmic Drugs Advisory Committee to recommend Raptiva for approval, which could happen by the end of this year, but panel meetings always mean risk.

That's not all, at least in the eyes of some. Gibbons noted that Genentech agreed to manufacture Enbrel (etanercept) for Amgen in 2002 to add revenue without hurting its own production because doing so created additional revenue for the company without impacting the production of its own products. Amgen (which acquired Enbrel, an anti-tumor necrosis factor drug first approved in late 1998 as a treatment for rheumatoid arthritis, through its merger with Immunex Corp.) and Genentech are presently working to get a facility in South San Francisco licensed to produce Enbrel.

Gibbons said some major investors are concerned about whether Genentech can keep up, but he finds less cause for alarm. The company is in the process of licensing a plant in Spain that would add 17 percent more capacity, and Gibbons doesn't expect Avastin to win FDA approval until 2004. Other analysts have predicted the drug will hit the market this year - but even if it does, he said, a "few years" will have to elapse before Avastin achieves high-demand, blockbuster status.

"You've got anywhere from people saying it's going to be a normal blockbuster path to those who say oncologists are going to prescribe it for every solid tumor right away," Gibbons said. "The answer might be somewhere in the middle."

In any case, Genentech has said it has "50 percent of the world's [manufacturing] capacity for protein-based biotech drugs," Gibbons said. "I think that's probably an overestimate. That said, obviously their capacity is pretty sufficient. If somebody can do it, they can."