GENENTECH: To Settle Fraud Investigation for $50M
Genentech Inc. announced Monday that it will pay $50 million to settle a federal investigation into its marketing practices -- "one of the biggest health care fraud investigations ever pursued against a drug company." The Los Angeles Times reports that the federal probe focused on Protropin, first approved in 1985 as a hormone replacement therapy for children whose deficient pituitary glands made them abnormally short. The government alleged that Genentech marketed the drug "aggressively" for off-label uses, a claim substantiated by a 1996 report noting that four of 10 children on Protropin were simply shorter than their peers, rather than hormone deficient. The South San Francisco-based company announced in its first-quarter earnings report that it set aside the $50 million for a potential "settlement in principle" with the U.S. attorney's office in San Francisco (Jacobs, 4/13).
Taking a Hit
The substantial settlement charge dropped earnings 65% to $14.4 million, from $41 million a year ago. Absent the charge, it would have earned $58.5 million, up 22%. Revenue was up $322.3 million, from $264.7 million last year. Genentech stock was up $2.6875 per share, to $87.50 on NYSE trading (King Jr., Wall Street Journal, 4/13).