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Roche hit with more legal problems

Genentech earned huge sums from drugs but did not pass royalties on to City of Hope


United States-based Roche subsidiary, Genentech, has been ordered to pay $300 million (SFr469.5 million) in unpaid royalties to a cancer centre.

The ruling, by a court in Los Angeles, found that Genentech had earned huge sums from drugs developed by researchers at the City of Hope cancer centre, and not passed on royalties to the centre.

City of Hope had agreed to allow Genentech to patent the research in exchange for royalty payments.

At issue in court was whether the firm should have paid royalties for drugs produced by companies that had licensed the patents from Genentech.

City of Hope accused Genentech of concealing 27 of 29 such license agreements, including ones for drugs such as human insulin and human growth hormone, which have generated sales of $32 billion since their development.

The court sided with the cancer centre and ordered Genentech - the world's second largest biotech company - to compensate City of Hope to the tune of $300 million.

Scientists at the centre in 1978 developed a way to use bacteria to produce human proteins - a discovery that paved the way for the biotech revolution and billions of dollars in drug sales.

Radio spots pulled

The decision came as the Roche Group was ordered in a separate case to drop radio advertisements for its flu drug after US regulators found the spots exaggerated the medication's effectiveness. Roche ran the ad during the winter Olympics for its Tamiflu influenza pill.

The decision is one of many that have hurt the company's balance sheet in the past year.

In December, Roche was fined €526 million (SFr774 million) by the European Commission for price fixing in the vitamin and additive cartels of the 1990s. Two years earlier the US slapped a $500 million fine on the company for a similar offence.

In a separate case, another Roche subsidiary, Roche Diagnostics, was ordered in February to pay $505 million in damages to IGEN, a US rival, for violating license agreements.

Roche will face more potential damages in the punitive phase of the Hope trial, which is due to begin on Monday, where the cancer centre is suing for close to $157 million.

Analysts said the Hope verdict is expected to send Genentech's shares lower and pull down the biotech sector.

swissinfo with agencies

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