J&J; Told to Pay Damages to Amgen
Ending a long-running feud over the world’s most successful biotechnology drug, a federal arbitrator Friday ordered Johnson & Johnson to pay Amgen Inc. of Thousand Oaks $150 million in damages for poaching its rival’s dialysis business.
The award by retired federal Judge Frank McGarr fell far short of the $1.2 billion Amgen demanded from J&J; for violating a 1985 licensing contract that stands out as one of the most contentious in the litigious biotechnology industry.
Amgen also failed to persuade McGarr to terminate the licensing pact, which splits the multibillion market for the anemia drug EPO.
As a young company, Amgen retained the rights to sell EPO to dialysis patients in the U.S., then considered the most lucrative portion of the market for the drug. Amgen sold J&J; exclusive rights to all other markets for the drug in the United States and Europe, including chemotherapy patients. As it happened, the largest market for EPO turned out to be for cancer patients, the business controlled exclusively by J&J.;
Not long after reaching the agreement, the firms began quarreling and have ended up in arbitration four times. The bickering continued after McGarr’s binding decision was issued Friday, with both sides claiming victory. J&J; and Amgen said they would try to force the other to pay attorney’s fees.
At stake is the $7-billion market for EPO, a genetically engineered copy of the human protein that spurs red blood cell production. Friday’s arbitration decision stems from a 1995 lawsuit by Amgen claiming that J&J; intentionally sold EPO to dialysis patients in the early 1990s. J&J; said such isolated sales did occur but were stopped when discovered by J&J; in 1993.
Analysts said Friday’s arbitration was anticlimactic given that Amgen last year introduced a second-generation form of EPO, called Aranesp, to reclaim business it long ago ceded to J&J.; Amgen launched Aranesp after arbitrators in 1998 denied J&J;’s contention that Aranesp, as a version of EPO, was covered by the 1985 agreement.
Amgen in the third quarter is expected to report sales of about $100 million for Aranesp and close to $590 million for EPO. J&J; reported $1 billion in EPO sales in the quarter.
“I think in the overall dispute, Amgen has been the most successful,” said Farbia Ghodsian, an analyst with Roth Capital Partners in Los Angeles.
Ghodsian said the award would not have a significant monetary effect on either firm.Friday’s arbitration news was announced after stock markets closed. Shares of Amgen rose to $50.80 in after-hours trading after closing at $50.48, up 33 cents, in regular Nasdaq trading. J&J; shares fell to $59 in after-hours trading after closing at $59.35, down 85 cents, on the New York Stock Exchange.
