PDL BioPharma settles longstanding legal dispute with Genentech/Roche
This article was originally published in Scrip
PDL BioPharma reached an agreement with Genentech and its parent company Roche to settle a longstanding legal dispute involving the smaller biotech's antibody humanization technology, although investors of the Incline, Nevada-based firm appeared discontent with the deal, driving shares down 3% on 3 February.
Shares of PDL BioPharma closed at $8.90, a loss of 20 cents, or 2.2%.
The trouble started in August 2010 when Genentech asserted that its monoclonal antibodies Avastin (bevacizumab), Herceptin (trastuzumab), Lucentis (ranibizumab) and Xolair (omalizumab) did not infringe on patents held by PDL in Europe.
PDL's annual revenues have been highly dependent on the royalty payments it receives from its antibody humanization technology.
Genentech licensed the antibody technology from PDL in 1998, expanding the deal in 2008, with the technology also later used in the Roche company’s drugs Kadcyla (ado-trastuzumab emtansine), Perjeta (pertuzumab) and Gazyva (obinutuzumab/GA101).
PDL asserted that its supplementary protection certificates (SPCs) granted by various countries in Europe covering the Genentech products extended the Nevada company's patent protection until December 2014, except for Herceptin, which is due to expire this coming July.
PDL believed the SPCs were enforceable against Genentech.
In July 2011, PDL won a favorable ruling from the Second Judicial District Court of Nevada, which denied Genentech's and Roche's motion to dismiss four of PDL's five claims for relief. The court also denied Roche's separate motion to dismiss for lack of personal jurisdiction (scripintelligence.com, 13 July 2011).
The district court, however, dismissed one of PDL's claims that Genentech committed a bad-faith breach of the covenant of good faith and fair dealing, stating that, based on the current state of the pleadings, no "special relationship" had been established between the companies as required under Nevada.
In June 2013, PDL sought arbitration in the case (scripintelligence.com, 13 June 2013).
Under the terms of the agreement revealed on 3 February, Genentech will pay a fixed royalty rate of 2.125% on worldwide sales of Avastin, Herceptin, Lucentis, Xolair, Kadcyla and Perjeta – effective retroactively to 15 August 2013 – instead of the previous tiered royalty rate in the US and the fixed rate on all ex-US based manufactured and sold licensed products.
Genentech and Roche have confirmed that Avastin, Herceptin, Lucentis, Xolair and Perjeta are licensed products as defined in the relevant license agreements with PDL.
They also agreed that Kadcyla is a licensed product, PDL said in a 3 February statement.
Genentech will pay the royalties on all worldwide sales of Avastin, Herceptin, Xolair, Perjeta and Kadcyla occurring on or before 31 December 2015.
But Genentech will owe no royalties on US sales of Lucentis occurring after 30 June 2013. It will pay a royalty of 2.125% on all ex-US sales occurring on or before 28 December 2014.
Under the agreement, Roche's GlycArt unit agreed that Gazyva is a licensed product. The royalty term and rate for that drug remaining unchanged from the existing license agreement, PDL said.
The settlement bars Genentech and Roche from challenging the validity of PDL's "Queen" patents, including its SPCs in Europe. It also precludes the big biopharmas from contesting their obligation to pay royalties and contesting patent coverage for Avastin, Herceptin, Lucentis, Xolair, Perjeta, Kadcyla and Gazyva and from assisting any third party in challenging PDL's Queen patents and SPCs.
The agreement further outlines the conduct of any audits initiated by PDL of the books and records of Genentech in an effort to ensure a full and fair audit procedure.
The deal also clarifies that the sales amounts from which the royalties are calculated do not include certain taxes and discounts, PDL said.
"The settlement agreement provides greater certainty for each of the parties in terms of the royalty rate payable under the agreement and the period over which they will be payable," PDL said, adding that it expects to recognize royalty revenue on the licensed products until the first quarter of 2016.
The company said settlement terms provide for a better definition of revenues and audit inspection procedures related to the arbitration dispute filed by PDL.
"The agreement announced today equitably resolves our litigation and arbitration in a way that benefits PDL's shareholders," said John McLaughlin, the company's president and CEO.