a few more details on the arbitration with schering-plough over the alpha interferon.
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Biogen, Schering in Arbitration About Drug Royalties
Bloomberg News
January 12, 1999, 6:50 p.m. PT
San Francisco, Jan. 12 (Bloomberg) - Biogen Inc., one of the
world's biggest biotechnology companies, said it's in binding
arbitration with Schering-Plough Corp. over royalties for a new
Schering use of Biogen's hepatitis C drug with blockbuster
potential.
The dispute centers on royalty payments for a patent related
to Rebetron, a hepatitis C treatment that won U.S. approval last
year. Rebetron consists of Intron A -- for which Schering makes
royalty payments under a licensing agreement with Biogen -- and
an ICN Pharmaceutical Inc. drug, ribavirin.
Schering-Plough charges more for Rebetron than it does for
Intron A alone, said Jeffrey Chaffkin, an analyst with
PaineWebber. A six-month Rebetron treatment costs about $8,000,
while Intron A costs about $5,000 a year, he said. The
recommended duration of Intron A treatment is 18 months.
''We believe the royalty Schering-Plough has been paying us
on Rebetron is substantially lower than required by the
contract,'' Biogen Chairman and Chief Executive James Vincent
said at a Hambrecht & Quist Group conference for investors in San
Francisco.
The arbitration began on Dec. 17 in New York with the
American Arbitration Association, Biogen spokeswoman Kathryn
Bloom said. In a statement, Schering-Plough said it ''firmly
believes that it pays the appropriate royalty to Biogen and
intends to defend its position vigorously.'' Schering-Plough
declined to elaborate.
''It's a real positive for Biogen because you know Schering
is probably giving them the bare minimum they thought they could
get away with,'' said Mary Ann Gray, an analyst with Raymond
James, who has a ''buy'' recommendation on Biogen.
Biogen stands to gain no more than $10 million a year in
revenue if it wins the dispute, Deutsche Bank Securities analyst
Alex To said.
''It doesn't seem like it's worth it,'' said To, who has an
''accumulate'' recommendation on Biogen shares. ''They could lose
and really hurt their relationship with Schering-Plough.''
Intron A is clearly the more expensive part of the
treatment, Chaffkin said. The drug is made by copying interferon,
a substance that the body normally uses to fight infection. These
kinds of drugs, which must be injected, are more difficult and
expensive to make than are pills such as ribavirin, Chaffkin
said.
Biogen's royalties won't fall as a result of the
arbitration, Gray said.
''If anything, it will go up,'' she said. ''So there's not
much downside for Biogen.''
Rebetron sales in 1998 could have been about $80 million,
while other sales of Intron A may have totaled about
$600 million, Chaffkin said.
In 1999, Rebetron sales could rise to $275 million, while
Intron A sales may remain at about $600 million, he said.
Biogen, based in Cambridge, Massachusetts, rose 7 to 89.
Schering, based in Madison, New Jersey, fell 1 1/2 to 51 1/4. |
