Press Releases
Chiron and Roche Agree to Major Diagnostic Licensing Terms
Chiron licenses HCV and HIV intellectual property for probe-based tests, agrees to limited license for NAT blood screening technology
EMERYVILLE, CA, October 11, 2000
Novartis Vaccines and Diagnostics (Nasdaq: CHIR) announced today that it has reached a broad patent license agreement with F. Hoffman-La Roche ("Roche") for probe-based clinical diagnostics for the hepatitis C virus (HCV) and human immunodeficiency virus (HIV-1). The license agreement in clinical diagnostics allows for settlement of pending litigation in the United States and six other major markets. Chiron will receive upfront payments representing royalties for past HCV sales and prepayment of certain HCV royalties. The agreements also provide for Chiron to receive contingent milestone payments from Roche for its HIV patent license.
The settlement will enable Roche to continue to market probe-based HCV and HIV diagnostic products, including its polymerase chain reaction (PCR) tests, for these viruses. Chiron will also grant a limited license to Roche under its HCV and HIV intellectual property for nucleic acid testing (NAT) of blood intended for transfusion."This agreement is a testament to the strength of our intellectual property portfolio. The terms of the agreement will provide Chiron with immediate value and significant royalty-based revenue going forward in clinical diagnostics, which is expected to experience considerable growth," commented Sen Lance, Chiron's chairman and chief executive officer.
HCV Technology License
Chiron will grant Roche a worldwide license to manufacture and sell probe-based HCV clinical diagnostic tests covered by Chiron's HCV patents. Chiron will receive upfront payments for royalties on past HCV sales and prepayment of certain royalties. Royalty payments on future product sales will be recognized beginning with sales made in the fourth quarter 2000 and extend for the life of Chiron's HCV patents. These payments will be calculated as the higher of a percentage of sales revenue or a fixed dollar amount for each test sold.
Chiron is a leader in the field of HCV due to the company's discovery and successful cloning of the virus in 1987. In addition to licensing technology to Roche, Chiron has also licensed HCV technologies to other companies working to prevent and treat this disease as part of an active out-licensing program. Major licensees of Chiron HCV technology include Abbott Laboratories, Bayer AG, Ortho Clinical Diagnostics (a Johnson & Johnson company), BioRad Laboratories and Gen-Probe Incorporated for diagnostics, and Pharmacia, Glaxo Wellcome and others for therapeutic applications.
HIV Technology License
Chiron also will license Roche under Chiron's HIV patents to manufacture and sell probe-based HIV clinical diagnostic tests. Chiron currently has an issued HIV patent in Europe. This patent is being challenged in opposition proceedings before the Technical Board of Appeals of the European Patent Office (EPO). Chiron also has HIV patent applications before the U.S. Patent and Trademark Office. %0D If the EPO confirms the validity of Chiron's HIV patent, Chiron will recognize revenue from Roche for royalties for past sales, and an upfront license fee will become non-refundable. Issuance of a U.S. patent will also trigger a significant milestone payment. In addition, Roche will pay royalties on future product sales calculated as the higher of a percentage of sales revenue or a fixed dollar amount for each test sold in jurisdictions in which Chiron's HIV patents have issued.
NAT Blood Screening Business
Chiron has agreed to license its HCV and HIV intellectual property for a limited period to permit Roche to continue to serve its existing customers with NAT products to screen blood and plasma. During the next few months, Chiron and Roche will have the opportunity to consider and negotiate the possible extension of a broad HCV and HIV license to blood screening. Chiron understands the importance of a reliable supply of NAT products to blood banks, and will continue to explore a variety of other licensing opportunities. During the period of this limited license, Chiron will receive royalty payments from Roche based on the number of blood donations tested, without regard to pool size, through the use of Roche HCV and HIV NAT products that are covered by issued Chiron patents.
"Nucleic acid testing provides an added layer of safety to the world's blood supply and public health," commented Rajen Dalal, president of Chiron's blood testing business. "This agreement with Roche ensures a smooth transition to a more permanent supply structure for this very valuable product."
Approximately 50 million samples of blood are donated and screened annually around the world for use in transfusion. Chiron and its partner Gen-Probe, Incorporated have developed a combination HIV/HCV nucleic acid test that is currently used to screen more than 70% of U.S. blood donations under an investigational new drug (IND) application. The test is currently approved for commercial sale in Australia, France, Germany, Portugal, Spain and Singapore, and is in evaluation in additional countries in Europe, Africa and Asia. The Chiron product is being used to screen more than 10 million donations worldwide each year.
This agreement does not resolve ongoing HCV patent infringement litigation challenging Roche's sale of immunodiagnostic assays. Chiron intends to continue to protect and enforce its HCV and HIV immunoassay intellectual property on the worldwide market.
About Chiron
Novartis Vaccines and Diagnostics, headquartered in Emeryville, California, is a leading biotechnology company that participates in three global healthcare markets: biopharmaceuticals, vaccines, and blood testing. The company is applying a broad and integrated scientific approach to the development of innovative products for preventing and treating cancer and infection. For more information about Chiron, visit the company's web site at www.chiron.com.
Chiron will be holding a conference call and webcast Wednesday, October 11 at 6:00 a.m. PDT. Please call 888.306.2701 (US) or 706.634.2118 (international) or log on to www.chiron.com to participate. Replay is available approximately 2 hours after the call through 11:59 p.m. EDT, October 13. To access, please call 800.642.1687 (US) or 706.645.9291 (international). The conference ID number is 715096.
This news release contains forward-looking statements that involve risks and uncertainties. Among the uncertainties related to the forward-looking statements made in this release are the successful completion of negotiations on the terms and conditions of the definitive settlement and licensing documents, the timing of execution of these documents, and the successful challenge of the validity of Chiron's intellectual property by a party other than Roche. A full discussion of the company's operations and financial condition, including factors that may affect its business and future prospects, is contained in documents the company files with the SEC, such as form 10-Q and 10-K. These documents identify important factors that could cause the company's actual performance to differ from current expectations, including the outcome of clinical trials, regulatory review, manufacturing capabilities and marketing effectiveness.
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- Fact Sheet -
Novartis Vaccines and Diagnostics and F. Hoffman-La Roche ("Roche") have reached broad patent license agreements for probe-based (nucleic acid testing, NAT) clinical diagnostics for the hepatitis C virus (HCV) and human immunodeficiency virus (HIV-1), and a limited agreement addressing NAT for the two viruses in the blood screening market.
The three agreements include:
- A worldwide license to Roche of Chiron's HCV intellectual property for probe-based clinical diagnostics.
- A worldwide license to Roche of Chiron's HIV intellectual property for probe-based clinical diagnostics for sales in jurisdictions in which Chiron HIV patents have issued.
- A time-limited license to Roche of Chiron's HCV and HIV intellectual property for use of NAT in blood screening.
Financial Implications HCV/HIV Clinical Diagnostics License As part of Chiron's agreement to grant Roche a worldwide license to its HCV and HIV intellectual property for probe-based clinical diagnostics, Chiron could receive up to $115 million total, $85 million of which is attributable to HCV and $30 million attributable to HIV.
The $85 million associated with the HCV license will be received immediately. Of this amount, about $60 million will be recognized in Q4 2000 as compensation for past sales by Roche, and the remainder will be recognized over time.
The $30 million associated with the HIV license will be received as follows: $10 million immediately, $10 million upon the European Patent Office (EPO) upholding the validity of Chiron's HIV patent in Europe, and $10 million upon the issuance of a U.S. patent covering HIV probe diagnostics. All of these amounts will be recognized as income in the future based on the European and U.S. patent decisions.
Roche will pay royalties on future sales, for the life of Chiron's HCV and HIV patents, which will be based on the higher of a percentage of sales revenue or a fixed dollar amount for each test sold.
HCV/HIV Blood Screening Limited License
Chiron will also grant Roche a limited license to its HCV and HIV intellectual property for use of NAT in blood screening. The license is limited to allow Roche to continue to serve its existing customers for the duration of their contractual arrangements. It provides an interim period in which the two companies can consider a broader, longer-term license. During the limited license period, Chiron will receive royalty payments from Roche based on the number of blood donations tested through the use of Roche HCV and HIV NAT products without regard to pool size.
For additional information, please see the October 11, 2000 press release on Chiron's corporate Web site, www.chiron.com.
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