Genetics Institute Inc. said the company's annual royalty revenuefrom its red cell booster, erythropoietin (EPO), will increase by 33percent following a restructuring of its licensing agreement withmarketing partner Boehringer Mannheim GmbH.

The new collaboration expands Boehringer's marketing rights andincreases Genetics Institute's royalty rate. The pharmaceutical firm, asubsidiary of Bermuda-based Corange Ltd., also no longer will holdin escrow a portion of Genetics Institute's royalties to cover EPOpatent litigation outside the U.S.

Genetics Institute, of Cambridge, Mass., expects to receive $22million in added EPO royalties from Boehringer, of Mannheim,Germany, during the first quarter of 1996 as a result of therenegotiated agreement. About $8 million will come from royaltiesreleased from escrow. The higher royalty rate and anticipatedincreases in EPO sales will generate the other $17 million.

Genetics Institute anticipates more revenue from Boehringer basednot only on a greater royalty percentage, but also on growth in marketshare for the drug and on expansion of sales into new territories.

Tuan Ha-Ngoc, executive vice president of Genetics Institute, saidWednesday Boehringer's EPO sales in 1995 represented a double-digit increase over the previous year. Worldwide sales of GeneticsInstitute's EPO were estimated at $600 million last year.

The restructured marketing collaboration expanded Boehringer'srights from Europe, South America, Africa, South Korea and Chinato other Asian countries, India and Australia. Chugai PharmaceuticalCo. Ltd., of Tokyo, has rights to sell the drug in Japan.

Genetics Institute has U.S. marketing rights, but has been preventedfrom selling EPO by Amgen Inc., of Thousand Oaks, Calif., which sofar has prevailed in federal court fights over patents related to thedrug.

The EPO battle dates to 1987 when both Amgen and GeneticsInstitute were awarded U.S. patents. The drug is marketed for treatinganemia in kidney disease patients.

A 1991 ruling in favor of Amgen barred Genetics Institute fromselling its product in the U.S. In the latest confrontation lastFebruary, a federal judge rejected Genetics Institute's new patentclaims, which were based on a 1994 EPO patent. Genetics Instituteappealed and is awaiting a ruling following a Dec. 6, 1995, hearing atthe U.S. Court of Appeals for the Federal Circuit in Washington.

Amgen sells EPO in the U.S. and China for treating kidney diseasepatients on dialysis. Its marketing partner, Ortho PharmaceuticalCorp., of Raritan, N.J., has rights to sell the drug in the U.S. for non-dialysis related indications and it has exclusive rights to all sales inEurope. Ortho is a subsidiary of Johnson & Johnson, of NewBrunswick, N.J. Amgen licensed EPO to Kirin Brewery Co. Ltd., ofTokyo, for Japan.

Worldwide sales of Amgen's EPO are estimated at about $1 billion.

Outside the U.S., Boehringer is waging the EPO patent fight againstJohnson & Johnson. Litigation is ongoing in U.K., Germany, France,Italy, Belgium, Switzerland, and the Netherlands.

Genetics Institute released its earnings report for 1995 Tuesday.Although the company reported a net loss for the year of $22.5million, or 84 cents per share, the figure included a charge of $24.8million, or 93 per share, related to the acquisition of SciGenics Inc., aresearch and development spin-off.

Without the charge, Genetics Institute achieved profitability for theyear with a net income of $2.4 million, or 9 cents per share. Thecompany's shares (NASDAQ:GENIZ) jumped 12 percent Tuesdayclosing at $65, a $7 increase. On Wednesday it ended the dayunchanged at $65.

In 1994, Genetics Institute reported a net loss for the year of $18.9million, or 71 cents per share on revenues of $130.8 million. Thecompany's revenues soared to $172 million in 1995. n

-- Charles Craig

(c) 1997 American Health Consultants. All rights reserved.