Amgen to pay Mass. General $186m: payment will end Enbrel royalty dispute

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Amgen to pay Mass. General $186m

Lump sum payment will end dispute over arthritis drug royalty

June 6, 2006

www.boston.com/business/healthcare/articles/2006/06/06/

Amgen Inc. has agreed to pay Massachusetts General Hospital $186

million to settle a royalty dispute over Enbrel, a lucrative drug

used to treat rheumatoid arthritis, hospital officials said

yesterday.

The payment eliminates future North American royalties on the drug,

which reduces symptoms of rheumatoid arthritis and psoriasis. The

hospital will continue to earn royalties on sales outside North

America, said Mass. General president Slavin.

Combined Enbrel royalties accounted for almost 75 percent of the

nearly $90 million in licensing fees the hospital received last

year, according to the hospital's annual report. Slavin said the

settlement would be used to bolster research at a time when federal

funding is being trimmed.

``This lump sum payment couldn't come at a better time, because it

will enable us to support research, which is threatened by cutbacks

from the National Institutes of Health, " Slavin said. ``It really

will help support us at a time when funding is under an incredible

amount of pressure. "

Enbrel has been one of Amgen's most successful drugs. Last year,

sales topped $2.5 billion, up from $362 million three years earlier.

Originally intended to treat rheumatoid arthritis, Enbrel later won

approval to treat juvenile arthritis, arthritis of the spine, and

psoriasis, among other conditions . It makes up more than 20 percent

of Amgen's revenue.

``It's been a blockbuster drug for the company, and has had double-

digit growth since Amgen acquired Immunex, " said Polk, a

spokesman for Amgen, based in Thousand Oaks, Calif. ``We're pleased

to reach an amicable resolution to this issue. "

Enbrel reduces inflammation by using decoy receptors to prevent the

body's immune system from attacking healthy cells.

Its creation stems from research at Mass. General led by one of its

star scientists, Harvard University researcher Seed.

The prominent teaching hospital, which is affiliated with Harvard

Medical School, signed the licensing agreement with Immunex Corp.,

the Seattle-based company that developed Enbrel in the 1990s.

Amgen later acquired Immunex and began reviewing its inherited

licensing contracts.

Royalty disputes like the Enbrel case are not unusual. As a drug is

developed, companies sign licensing agreements with companies or

institutions that contribute technology to the drug. But as products

evolve and are put to use in unforeseen ways, disputes can arise

over who should receive royalties.

``You are seeing more disputes develop between academic or healthcare

institutions and licensees. This was really a prototype, " said

F. Holt Jr., who heads the Boston intellectual property

litigation practice at Kirkpatrick & Lockhart Nicholson Graham LLP.

``When you have the promise of enormous profits, that almost

assuredly will lead to disputes in the future, especially where one

party is perceived as reaping enormous benefits. "

What observers say is unusual, however, is that Amgen has used the

dispute to effectively buy out royalties to the drug.

Universities tend to favor long-term revenue streams and endowments

over short-term payments, said Mark , managing director of

Recombinant Capital, a consulting firm.

has no ties with either Mass. General or Amgen, but has

consulted in the past for Amgen.

``It's certainly a show of strength for the product. One, that Amgen

would be willing to buy out the product and two, that they are

strong and getting stronger and that they are willing to give the

university an offer it can't refuse, " said.

Neither party would reveal details about the original licensing

agreement, so it is unclear how much the hospital might have

received from Amgen in the future.

``We just had to make a judgment as to whether this was sufficient

to cover the future value of the drug. As for the longer run, we'll

never know, " Slavin said. ``Obviously by taking the lump sum, we're

no longer at risk for downturns in the sale of Enbrel. "