NEW YORK (CNN/Money) - A Los Angeles jury ordered Genentech Inc. to pay $200 million in punitive damages Monday stemming from a lawsuit over unpaid royalties to California cancer research center City of Hope.
Including initial compensatory damages, the amount brings the total judgment against Genentech (DNA: up $1.89 to $34.84, Research, Estimates) in a lawsuit bought by the City of Hope National Medical Center to just over $500 million.
Genentech, which vowed to appeal, said the damages will force it to take about half a billion dollars in charges against its second-quarter results. But that didn't hurt the company's shares, which rose almost 6 percent Monday.
A spokesman for the Duarte, Calif.-based City of Hope said the research facility had asked the Los Angeles Superior Court jury for punitive damages between $300 million and $580 million.
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The jury reached its 9-3 verdict after two days of deliberation. The jury foreman, Herman Askew, said it was a difficult decision. "There really is no bad guy," he said. "It's just a business deal that wasn't clear."
City of Hope sued Genentech in 1999, claiming the South San Francisco-based biotechnology company concealed over a 15-year period the licensed sales of protein products such as hepatitis vaccines that were worth about $16.7 billion.
City of Hope, which made the protein manufacturing discovery, contended it is owed 2 percent royalties on those sales, plus interest, or $457 million, based on the agreement it signed with Genentech.
Genentech said it will begin the post-verdict and appeals process immediately.
"We strongly disagree with the result in this case," Arthur D. Levinson, chief executive officer at Genentech, said in a statement. "Genentech has lived up to the letter and spirit of the contract and paid the City of Hope everything it was entitled to under the 1976 agreement.
Genentech said the damages will result in a one-time charge of approximately $500 million, taken in the second quarter of 2002.
Earlier this month, the same jury found that the biotechnology company had breached a 1976 drug royalty contract and awarded compensatory damages of $300.2 million.
At issue was the commercial rights to research conducted in the late 1970s that yielded a way to use bacteria to produce human proteins. That discovery paved the way for the biotechnology revolution and billions of dollars in sales in drugs like human insulin.
--from staff and wire reports