Biogen Inc. received a favorable U.S. arbitration decision regarding adispute with SmithKline Beecham (SKB) over royalty payments froma hepatitis B vaccine.

Biogen Inc., of Cambridge, Mass., would have had to pay back $18.4million to SKB had the arbitration panel ruled the other way. Biogenalso would have had future U.S. royalty payments reduced.

Neither company would disclose the exact nature of the dispute. Butit centered on the legal interpretation of the companies' 1988agreement in which Biogen licensed its hepatitis B patent portfolio toSKB. The UK-based pharmaceutical company wanted to recoup$18.4 million it had paid since 1990.

SKB had 1994 sales of $583 million from the product in dispute,Engerix-B, a genetically engineered vaccine designed to prevent thevirus. Biogen's royalty payments from those sales, and fromsublicensee Merck & Co. Inc., accounted for 35 percent to just over40 percent of its revenues the past few years, said Kenneth Keen, aBiogen spokesman. Biogen's revenues in 1994 and 1993, excludinginterest, were $140 million and $136 million, respectively, he said.

The companies have separate agreements governing royalty paymentsfrom U.S. and non-U.S. sales. In 1992 SKB received a favorabledecision in arbitration held in the U.K. relating to sales outside theU.S. Biogen appealed that decision, which was upheld by an Englishcourt last year.

Biogen paid SKB $2.6 million in the second quarter of 1994 becauseof that decision, Keen said.

The agreement specified arbitration as the means of disputeresolution. SKB is evaluating the decision in the U.S. and is not sureif it will take any further steps, said Sharon Arnold, the company'sdirector of communications programs.

"We viewed the royalty one way, they view it another," Arnold said."There won't be any difference in our relationship going forward."

In a prepared statement, Jim Vincent, Biogen's chairman and CEO,said of the U.S. decision, "Biogen's proprietary hepatitis Btechnology is one of the company's greatest assets and we are pleasedthat the arbitration panel supported our position. The decision isespecially important since hepatitis B vaccine sales have continued toincrease in recent years." n

-- Jim Shrine

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