Insmed gained rights to develop Iplex for nonshort stature indications.

Insmed will stop providing its only product, Iplex, for short stature indications, according to the settlement reached with Tercica and Genentech on the patent infringement case.

Tercica’s shares consequently jumped over 17% to open trading at $5.91. On the other hand, Insmed is restructuring its operations, reducing its current workforce of 150 by approximately 34%. Its sales and marketing group will be eliminated and production at Insmed’s manufacturing site in Boulder, CO will be scaled back to reflect the reduced drug product required.

The agreement comes about three months after a federal jury in Oakland, CA, ruled that Insmed infringed patents controlled by Tercica and owned by Genentech. The jury awarded damages of $7.5 million for past sales of Iplex, plus royalties of 15% to 20%.

Under terms of the settlement, the damages have been waived. Insmed will also withdraw its marketing authorization application for severe primary IGF-1 deficiency in the EU.

The company will be able to manufacture, develop, and commercialize Iplex for certain nonshort stature indications. The licensing and development rights gained from Tercica and Genentech include diseases like severe insulin resistance, myotonic muscular dystrophy, and HIV-associated adipose redistribution syndrome.

Tercica and Genentech retains opt-in rights and royalty provisions. If either exercises the opt-in right, Insmed would be reimbursed 50% of the development costs already incurred. Future development costs would be shared equally, and if commercialized, profits will also be split equally. If Tercica exercises its right, Genentech will receive sales-based tiered royalties of 6%-15%. If neither firm opts in, Insmed will pay a 4% royalty to Genentech.

This settlement, license, and development agreement is in effect until 2018 or the expiration of any subsequent Tercica/Genentech issued patents that cover Iplex or its indications, which ever comes later.

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