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Adverse patent ruling could cost Genentech millions

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SAN FRANCISCO -- Federal regulators rejected a valuable Genentech Inc. (NYSE: DNA) patent that protects how it makes some biotechnology drugs, the company said last week.

While the U.S Patent and Trademark Office ruling could cost the company millions of dollars in royalty payments, the South San Francisco-based company said the patent would remain valid while it pursues appeals at the USPTO and the courts. The appeals process could last longer than two years.

In an unrelated action, the Food and Drug Administration last Wednesday also ordered Genentech to strengthen the warning label for the asthma medication Xolair because some patients taking the drug had suffered life-threatening reactions that inhibits breathing known as anaphylaxis.

The patent dispute dates to 2003 when Gaithersburg, Md.-based MedImmune Inc. (Nasdaq: MEDI) challenged the validity of the patent, arguing that it should have expired and other companies were free to use the technology without having to pay Genentech.

The patent was set to expire last year, but Genentech acquired another patent through a deal with another drug company that extends it to 2018.

The U.S. Supreme Court ruled in January that MedImmune could sue Genentech for patent infringement, but didn't rule on the merits of the case. MedImmune's $1 billion-a-year drug Synagis is made with the patented technology and the company wants to stop paying Genentech undisclosed royalties.

Genentech spokesman Geoff Teeter declined to disclose how many companies pay royalties to Genentech because of the patent. He said several companies including Abbott Laboratories (NYSE: ABT), Centocor Inc. and Imclone Systems Inc. (Nasdaq: IMCL) paid Genentech a combined $105 million in royalties related to the patent last year.

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