GTG in $18m deal with Genzyme

Genetic Technologies (ASX: GTG) has taken the first step in forming a strategic alliance with US-based biotech Genzyme by granting a licence for its non-coding DNA patents that will bring in more than AUD$18 million in revenue over the next 11 years.

Under the terms of the agreement, Genzyme will pay GTG a signing fee of AUD$7.5 million including a $5 million upfront payment and $2.5 million as an 'in-kind' transfer of intellectual property from Genzyme to GTG. An additional annual fee of $1 million will also be paid for the life of the patents -- currently until 2015.

GTG executive chairman Mervyn Jacobson said the deal was the biggest to date for the company, which has aggressively pursued licensing deals for its non-coding DNA patents. The agreement could herald further deals with large biotech companies.

"Genzyme is very well regarded -- if it moves in a particular direction, other people are likely to follow," he said. "Certainly there are more deals out there of this value or higher."

Genzyme's licence includes non-exclusive rights in the USA, Europe and Japan to the non-coding patents for human genetic applications including research, pre-clinical development and commercial genetic testing. The Asia-Pacific region is not included in the agreement.

But the two companies are likely to form even closer links. Jacobson said the agreement was the first step in the development of a long-term strategic alliance. Initially, Genzyme Genetics, a division of the company which offers a range of human genetic tests, has offered to help GTG to build up its testing services in Australia, New Zealand and Asia, based on some of the tests it has developed.

And Genzyme has also transferred some undisclosed licence rights over to GTG for which the Australian company will be responsible for further sub-licensing, according to Jacobson.

"We'll become a commercialisation arm for them, not just in the Australia and New Zealand region but in the US and other regions as well," he said.

At the time of writing, GTG's share price had risen nearly nine per cent on very heavy trading to $0.63.