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Small Biotech Firm Nets $11M in Patent Case

Posted on: Monday, 3 April 2006, 03:03 CDT

By Hacker, Tom

FORT COLLINS - Three years after slapping one of the nation's largest genetic research companies with a patent-infringement lawsuit, a much smaller biotechnology company with strong Fort Collins ties has emerged $11 million richer.

The settlement between comparatively tiny Genetic Technologies Ltd. (Nasdaq: GENE) and biotech giant Applera Corp. ends the most contentious court fight that Australia-based Genetic Technologies has pursued in its quest to protect patents.

The settlement also brings to $53 million the value of licenses that Genetic Technologies has issued to companies seeking to use its technology.

"The time for sowing and nurturing has passed," said Mervyn Jacobson, president and CEO of Genetic Technologies. "The time has arrived for us to reap the rewards of our efforts."

Jacobson, an Australian citizen, is the founder of two Fort Collins-based biotechnology companies, XY Inc. and Cytomation Inc. - now Dako Cytomation - that have expanded far beyond their origins in Colorado State University research labs.

While Genetic Technologies is based in Melbourne, Australia, it also has Fort Collins roots, having operated a research laboratory here during its start-up phase.

While the company markets genetic testing products, including human paternity tests and other tests that measure disease risk in various animal and plant species, its main source of revenue is from licenses and from legal settlements with companies that violate its patents.

The settlement with Applera, and a new push to license its technology to other users, will tip the balance even more toward income from intellectual property rather than products.

"In the post-Applera era, licensing will be our biggest revenue stream," Jacobson said. "In a business sense, the technology is mature, the world needs it, and we're offering it."

What Genetic Technologies offers is a. new way of using DNA, the genetic material that is the building block of all life forms, for genetic research.

The basis of the company's research discoveries is its application of so-called "noncoding" DNA, widely categorized as "Junk DNA" by other genetic researchers. For years, Genetic Technologies quietly worked on new applications for non-coding DNA, wrapping their discoveries in new patents as they were developed.

When the rest of the genetic-research world changed course and began applying non-coding DNA to research efforts, patent violations popped up everywhere, Jacobson said.

"The Applera settlement was the sixth lawsuit that we've had to deal with," he said. "It was clearly the most intense and protracted."

Lawyers for the two companies met in December in a Northern California courtroom for a procedure called a Markman hearing, wherein a judge interprets patent claims and renders opinions on their validity. Applera and Genetic Technologies agreed to settle following the hearing, avoiding a jury trial.

"The courts these days go out of their way to urge people to settle," Jacobson said. "We were able to arrive at an agreement."

Applera Corp.'s two business units are separately listed on the New York Stock Exchange. The target of Jacobson's lawsuit, Celera Genomics (NYSE: CRA), is one of the nation's leading genomic research firms, producing genetic therapies for cancer, immune system disorders and inflammatory diseases.

"They've been around in this molecular biology business a long time, and they're clearly one of the leaders," said Eric Schmidt, an analyst with New York-based SG Cowan Securities Inc. who researches the company. "When you think of genetic and genomic research and products, they're at the top of the list." Patent disputes involving the company are not uncommon, Schmidt said. Applera is more often on the complaint side of disputes, as it defends its own intellectual property rights.

"They spend a lot on legal fees," Schmidt said. "They've never quantified that, but it's a lot."

The Applera-Genetic Technologies settlement specified payment of $15 million in Australian currency - or about $11 million U.S. at current exchange rates - in cash and research equipment. Jacobson said his company would also benefit from continuing license income and from unspecified business opportunities arising from the settlement.

Genetic Technologies Ltd.

Founded: 1989

Management: Mervyn Jacobson, president and CEO

Headquarters: Melbourne, Australia

Revenue 2005: $8 million

Employees: 20

Stock symbol: GENE (Nasdaq)

Web: www.gtg.com.au

SOURCE: BUSINESS REPORT RESEARCH

Applera Corp.

Founded: 1998

Management: Tony L. White, chairman, president and CEO

Headquarters: Rockville, Md.

Revenue 2005: $31 million

Employees: 360

Stock symbol: (Celera Genomics unit): CRA (NYSE)

Web: www.applera.com

SOURCE: BUSINESS REPORT RESEARCH

Copyright Northern Colorado Business Review Mar 03, 2006

Source: Northern Colorado Business Report

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