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Healthcare

UPDATE 3-J&J must pay Basilea $130 mln for drug licence breach

* Basilea, Johnson & Johnson were developing ceftobiprole

* Tribunal ruled Johnson & Johnson was in breach of licence

* Health authorities said trials didn’t meet good practice

* Basilea shares up 1 percent

(Adds Johnson & Johnson comment, detail on superbugs)

By Katie Reid

ZURICH, Nov 29 (Reuters) - Johnson & Johnson (J&J) JNJ.N must pay former Swiss partner Basilea BSLN.S about $130 million for breaching a licence agreement for a superbug antibiotic, a Dutch arbitration tribunal has ruled.

The Swiss biotech group, which was developing ceftobiprole with the U.S. healthcare company, said on Monday the amount awarded by the Netherlands Arbitration Institute included lost milestone payments as well as damages.

Earlier this year J&J ended a partnering deal with Basilea, returning the rights to ceftobiprole to Basilea after European and U.S. authorities decided not to back the drug, citing doubts about the reliability of trial results.

J&J, which acted as Basilea’s drug sponsor, was in charge of the trials, which health authorities said had not been done in compliance with good clinical practice.

“It is correct that the arbitration panel has reached a decision to award Basilea damages, but the panel did also reject several claims that were made by Basilea against Johnson & Johnson,” a spokeswoman for J&J said.

The emergence of hospital superbugs such as MRSA has increased the need for new effective treatments and refocused attention on antibiotics.

“We are very pleased that we can gain full control and development and commercialisation of ceftobiprole at the latest by February 2011,” Basilea Chief Executive Anthony Man said.

“It’s our priority to make this drug available to patients as soon as possible,” Man told Reuters.

POSITIVE SURPRISE

At 1508 GMT, shares in the group, which is worth some $648 million and had revenue of about 27 million Swiss francs ($26.9 million) in 2009, were trading over 1 percent higher, adding to the 5.2 percent gained so far this year.

“Even though we had been expecting that the arbitration would rule against J&J, today’s announcement comes as a positive surprise to us,” Helvea analyst Olav Zilian said in a note.

“This awarded payment of about $130 million compares to about 100 million francs in lost milestone payments for approval of ceftobiprole in the USA and Europe, and possibly some 15 million francs in costs for the arbitration on Basilea’s side, as we speculate,” Zilian said.

Basilea Chief Financial Officer Ron Scott said the drug still had significant sales potential, but declined to give a peak sales estimate.

“The medical need has not changed. There are people who are dying in hospitals because of these infections,” Scott said.

There has been market speculation that larger Swiss biotech group Actelion ATLN.VX, itself the subject of takeover talk, may be interested in buying Basilea. The two companies work together in Canada, where they have a distribution agreement for Basilea's eczema treatment toctino.

Asked about being a potential takeover target, Scott said the company did not disclose any discussions it had with other groups but said: “We are certainly aware of the assets that we have and that there aren’t very many assets like those around.”

Zilian said the award ruling made Basilea more appealing.

“It is definitely much more attractive in view of the cash it has on its balance sheet versus its market cap,” he said. (Editing by Matthew Jones and David Holmes) ($1 = 1.003 Swiss francs)

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