PDL files for arbitration for alleged royalties underpayments by Genentech

USA-based PDL BioPharma (Nasdaq: PDLI) revealed today (June 11) that it has filed a Notice of Arbitration against Genentech, the US biotech subsidiary of Swiss drug major Roche (ROG: SIX), with the American Arbitration Association in Voorhees, New Jersey, alleging, inter alia, that Genentech underpaid royalties going back to at least 2007 and impeded PDL's attempts to have Genentech's books and records inspected to determine whether Genentech's past payments to PDL were accurately calculated.

PDL pioneered the humanization of monoclonal antibodies and, by doing so, enabled the discovery of a new generation of targeted treatments for cancer and immunologic diseases. Genentech and parent Roche market a number of MAb-based products, including Avastin (bevacizumab), Herceptin (trastuzumab), Lucentis (ranibizumab) and Xolair (omalizumab, which PDL believes infringe its patents.

In 2009, PDL retained KPMG to conduct an independent inspection and analysis of the books and records of Genentech and its sub-licensees for the three year period covering January 1, 2007 to December 31, 2009, a right granted to PDL under its patent license master agreement and license agreements with Genentech. KPMG reported to PDL that, due to limitations on its inspection imposed by Genentech, it was unable to assess the completeness or accuracy of Genentech's reporting of royalties. KPMG concluded that, based on the limited information it was able to review, Genentech appears to have underpaid PDL in an amount that, if substantiated, PDL believes would be material. Genentech has informed PDL that it disagrees with KPMG's conclusions and that it believes that it has correctly calculated royalties due.