UPDATE 2-Calif. court upholds $300 mln Genentech settlement

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SAN FRANCISCO, April 24 (Reuters) - The California Supreme Court upheld a $300 million breach of contract award against Genentech Inc (DNA.N: Quote, Profile, Research, Stock Buzz) on Thursday, but set aside a punitive damage award of an additional $200 million.

The company said the decision will add about $190 million to its first-quarter net income.

"We affirm that part of the judgment awarding City of Hope $300,164,030 in damages for Genentech's breach of contract," the Supreme Court ruled.

"Because punitive damages cannot be awarded for breaching a contract, however, our conclusion that there was no fiduciary relationship requires us to set aside the jury's award of $200 million in punitive damages to City of Hope."

A Los Angeles jury in 2002 decided that Genentech breached a 1976 contract relating to research done by two City of Hope medical center scientists that lead to the invention of the first biotechnology drug, a synthetic insulin called Humulin.

The jury ordered Genentech to pay $300 million in back royalties and $200 million in punitive damages.

The South San Francisco-based company in 2002 posted a charge of $500 million to account for the judgment.

Genentech said it expects to recognize a favorable litigation settlement of around $315 million in the first quarter of 2008, reversing $200 million in punitive damages originally awarded and about $115 million in interest accrued since 2002.