Genentech Inc. announced Wednesday that it has reached asettlement with Miles Inc., the Scripps Research Institute andRhone-Poulenc Rorer Inc. over recombinant DNA- and plasma-derived human Factor VIII, closing the final chapter on thedecade-old litigation.

Genentech also reported Wednesday that its net income nearlytripled in 1993.

The patent-infringement suit concerning the blood-clottingfactor used in the treatment of hemophilia began in 1983,when Genentech of South San Francisco, Calif., and Miles weresued by the Rorer Group (Rhone-Poulenc Rorer's predecessor),which claimed that the two companies were violating theScripps Institute's patent on Factor VIII licensed exclusively toRorer.

Genentech is the exclusive supplier of the gene used in theproduction of Miles' Kogenate (recombinant human FactorVIII). Genentech, which originally cloned the Factor VIII geneand licensed it to Miles in 1984 as part of a collaborativeagreement, has continued to supply Miles with the gene duringthe litigation. Kogenate was approved by FDA in February1993.

Genentech's dispute with the plaintiffs is the last to beresolved. Miles settled with Rhone-Poulenc and Scripps underundisclosed terms in January 1993. While the specific terms ofthe Genentech settlement also were not disclosed, the companywill continue to supply Miles with the necessary gene forKogenate. Miles will supply Rhone-Poulenc with recombinant-human Factor VIII, Genentech said, indirectly increasingroyalties for the biotechnology company. Rhone-Poulenc nowmarkets only plasma-derived Factor VIII.

Genentech estimated the worldwide market for Factor VIII tobe about $500 million a year. Another genetically engineeredFactor VIII product, Recombinate, is sold by Baxter HealthCareCorp.'s Hyland Division and supplied in bulk by GeneticsInstitute Inc. Baxter concluded its involvement in the lawsuitlast May by paying Rhone-Poulenc a $105 million settlement.Rhone-Poulenc's claims against Baxter had been similar tothose levied at Genentech. Recombinate received FDAmarketing approval in December 1992.

Following the settlement, the U.S. District Court in San Franciscodismissed the case with prejudice, meaning that the claimcannot be reintroduced to the court at a later date.

Earnings almost Tripled

The approval of Kogenate contributed to increased earnings forGenentech last year. The company announced 1993 net incomeof $58.9 million, almost three times its 1992 net income of$20.8 million. Earnings per share increased to 50 cents in 1993from 18 cents in 1992.

In the fourth quarter, net income was $18.7 million vs. $6.2million in the same period in 1992. Overall revenues for 1993were up 19 percent to $650 million from $544 million in 1992.Revenues from Kogenate sales will soon be supplemented byroyalties from Monsanto Corp.'s sales of Posilac (recombinantbovine growth hormone), although this product did notcontribute to 1993 earnings.

In addition to royalty income, Genentech attributed its strongshowing to a 30 percent increase in sales of its clot-bustingdrug, Activase tissue plasminogen activator (t-PA), to $236million this year from $182 million in 1992. The company alsosaid sales of its human growth hormone, Protropin, increased 5percent to $216.8 million in 1993 from $205.9 million in 1992.Sales of Actimmune (interferon gamma 1-b) increased to 4.3million from 2.9 million in the 1992 period.

The company will begin earning revenues this year from itstwo latest approved products: Nutropin, for treating growthfailure resulting from chronic renal insufficiency before kidneytransplant; and Pulmozyme, for the treatment of cystic fibrosis,which is expected to bring in sales of over $90 million in 1994.

Genentech also reported heavy research and developmentinvestment in 1993, spending $299.4 million compared with$278.6 million the previous year.

The company's stock (NYSE:GNE) closed at $50.50 onWednesday, up 25 cents.

-- Karl A. Thiel Associate Editor

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