US court reduces Genentech damages

In a contractual dispute relating to a sponsored research agreement, the US California Supreme Court has overturned the award of $200.0 million in punitive damages by biotechnology giant Genentech resulting from action brought by the City of Hope National Medical Center (COH). The punitive damages were part of a 2004 decision of the California Court of Appeal which upheld a 2002 Los Angeles County Superior Court jury verdict awarding around $300.0 million in compensatory and $200.0 million in punitive damages to the COH.

As a result of the Court's decision, Genentech, majority-owned by Swiss drug major Roche, expects to recognize a favorable litigation settlement of about $315.0 million in the first quarter of 2008, reversing $200.0 million in punitive damages originally awarded and the accrued interest thereon totaling around $115.0 million recorded since 2002. This settlement will result in a favorable effect to net income in the first quarter of 2008 of some $190.0 million, or $0.18 per diluted share, it says.

The company expects to pay out approximately $475.0 million in the second quarter, reflecting the amount of compensatory damages awarded, plus interest thereon from the date of the original decision.