Genentech Inc. and the University of California at San Francisco are close to settling a titanic, decade-long court battle in which the pioneering biotechnology company was accused of stealing vital genetic research.
University Chancellor J. Michael Bishop said in a statement to faculty members this week that a settlement is near in the dispute over patent rights to genetically engineered human growth hormone. A source with detailed knowledge of the case said a proposal would be presented Thursday or Friday to the regents of California's university system under which Genentech would pay as much as $200 million, an enormous sum in a patent-infringement case.
Spokesmen for the university and for Genentech, based in South San Francisco, declined yesterday to discuss the proposed settlement, saying final details were being worked out. "The parties hope to have an agreement soon, but no particulars are now available," Bishop said in his statement.
A settlement, if it comes about, would bring an end to a bitterly fought battle over science and honor that dates to the beginnings of the genetic revolution now sweeping the worlds of medicine and agriculture.
Genentech, the first biotechnology company, was born in the heady days of the mid-1970s, when scientists in the San Francisco Bay area were developing new techniques for manipulating genetic material. One of the company's earliest accomplishments was to insert the gene for human growth hormone into bacteria, coaxing them to produce the substance as though it were part of their normal biology.
For the first time, this breakthrough made available large quantities of the precious hormone. It helped to show that vital substances normally made in tiny quantities by the human body could be mass-produced as potential drugs. Sold by Genentech under the trade names Protropin and Nutropin, growth hormone is used to treat children with dwarfism and in treating a handful of other diseases.
Growth hormone was one of the signature achievements of the biotechnology era, sparking an outpouring of genetic research that is still paying dividends. In light of Genentech's early success with growth hormone and other drugs, hundreds of biotechnology companies were formed around the world. They are developing treatments for many afflictions of mankind, from arthritis to cancer to the rarest inherited maladies.
Yet the university charged, in a lawsuit filed in 1990, that Genentech essentially stole its big breakthrough. The university said the critical step, isolating the human gene for growth hormone, was done by researchers on its campus. The university was granted a patent on the work.
Genentech admitted that two of its researchers who had previously worked at the university went back to their old laboratory on New Year's Eve 1978 and purloined stocks of genetic material, carrying them back to a Genentech lab. But the company denied that it used that material in its development program for growth hormone and denied that it had violated the university's patent rights, pointing to growth-hormone patents of its own.
A California jury deadlocked on the issue in June, voting 8 to 1 to find Genentech guilty of patent infringement. Instead of going back to trial and risking a verdict that some lawyers believed could have exceeded $500 million, Genentech has apparently offered to settle.
The source with knowledge of the case said the $200 million settlement would include an agreement by Genentech to build a research building for the university costing as much as $50 million. The source believed the company agreed to this provision, instead of simply paying an all-cash settlement, as a face-saving measure. UCSF scientists who took part in the original research would also be entitled to a share of the money. The actual cash disbursement to the university could be as low as $100 million, the source said.
A settlement as large as $200 million would be a significant, though hardly fatal, blow to Genentech. The company reported income of $181.9 million on revenue of $1.1 billion in 1998. Genentech has a cash hoard exceeding $1 billion. It is majority-owned by F. Hoffmann-La Roche Ltd., the Swiss pharmaceutical giant with billions in assets.
The patent case had worried some investors, though, and word of a potential settlement buoyed Genentech shares yesterday. They closed at $76.12 1/2, an increase of $4.37 1/2, in trading on the New York Stock Exchange.
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