Closing Arguments for Genentech Case

Closing arguments will begin today in City of Hope National Medical Center’s $445-million breach-of-contract case against Genentech Inc. The case could go to a Los Angeles County Superior Court jury as early as Wednesday.

The Duarte-based hospital claims Genentech owes it royalties on drugs produced by third parties that licensed a City of Hope discovery from Genentech.

The South San Francisco-based biotechnology company said that it has paid the hospital $302 million in royalties through March 2002 and does not owe any of the amount claimed.

The dispute involves a 1976 contract that established a research collaboration between the hospital and Genentech, then a start-up company with one full-time employee. Genentech agreed to fund specific research projects at City of Hope and pay the hospital royalties on products that resulted from its discoveries. City of Hope agreed to give patents to Genentech.

City of Hope scientists discovered a method of producing human proteins in bacteria, a breakthrough that paved the way for the first biotechnology drug, human insulin. Genentech has paid City of Hope royalties on sales of insulin and another drug that resulted from the collaboration, human growth hormone. But Genentech said it is not required to pay the hospital royalties on sales of other drugs by third parties that have licensed the patent.

City of Hope said the contract requires Genentech to pay the hospital a 2% royalty on third-party sales. The hospital said it is owed royalties and interest on 22 drugs, including hepatitis B vaccine.

This is the second time the case has been tried. In October, a jury deadlocked 7 to 5 in favor of Genentech after six days of deliberations.