AstraZeneca settles Nexium dispute with Ranbaxy

LONDON AstraZeneca has settled a patent dispute with India’s Ranbaxy Laboratories over its top-selling ulcer pill Nexium, securing future sales of the product and boosting its shares 8 percent.

Under the new deal, Ranbaxy will start selling generic Nexium (esomeprazole magnesium) on May 27, 2014, when the first of a series of patents expire, the companies said on Tuesday. Ranbaxy will be the exclusive generic distributor for the first six months, according to Reuters.

AstraZeneca's shares rose as much as 11 percent after the drugmaker reported the settlement, before settling 8 percent higher at 21.38 pounds ($41.95) by early morning, though AstraZeneca said the settlement would not affect the 2008 earnings outlook.

Ranbaxy chief executive officer Malvinder Singh hailed the deal as “extremely positive” for the Indian group, Reuters reported.

Ranbaxy will also benefit from an agreement—part of AstraZeneca’s outsourcing initiative—allowing it to formulate a portion of AstraZeneca’s U.S. supply of Nexium from May 2010, with the active ingredient being made from May 2009. And it has additional rights to distribute authorized generic versions of two older AstraZeneca products—heart drug Plendil (felodipine) and the 40 mg version of ulcer pill Prilosec (omeprazole).

Only Pfizer’s cholesterol medicine Lipitor, on $12 billion, sells more than Nexium, with its sales of $5.2 billion in 2007.

But AstraZeneca’s future focus had been under cloud with the expiry this week of a 30-month stay period blocking regulatory approval of a generic version. “The agreement allows us to spend more of our time and money in the laboratory and less in the courtroom,” AstraZeneca’s chief executive officer David Brennan told reporters in a conference call.

The deal is also good news for U.S. drug maker Merck, which collects a royalty on U.S. sales of Nexium.

AstraZeneca also faces a generic threat to its second-biggest drug Seroquel, for schizophrenia. Analysts, however, believe the patents protecting this product may be stronger than those surrounding Nexium, according to Reuters.