UPDATE 1-Medicis shares soar after legal settlement with Teva

(Adds analysts' comments; updates share movement)

By Vidya L Nathan

BANGALORE, March 19 (Reuters) - Shares of Medicis Pharmaceutical Corp (MRX.N) soared 35 percent Thursday, a day after it settled a patent dispute with Teva Pharmaceutical Industries (TEVA.TA)(TEVA.O) related to its acne drug Solodyn.

The settlement mitigates concerns that generic competition could eat away as much three quarters of revenue from Solodyn -- Medicis' key drug. [ID:nBNG467628]

Analysts look at the settlement as a "significant positive" for Medicis and expect the Scottsdale, Arizona-based company to arrive at similar settlements with other companies that have a Solodyn generic waiting to be launched.

"I would feel that if Impax (IPXL.O) and Teva were willing to settle, why wouldn't Sandoz (a Novartis (NOVN.VX) unit) and Mylan (MYL.O) also settle," Thomas Weisel Partners' Aaron Mishel said.

In December, Medicis and Impax settled all legal disputes related to Solodyn between them. [ID:nBNG419217]

However, analysts are concerned about the price that Medicis will have to pay for any future settlements.

"They are going to avoid any outright payments to the generic companies because that is the kind of deal that the Federal Trade Commission loves to probe into," Leerink Swann analyst Gary Nachman said.

Nachman expects Medicis' deal with Teva to also come under the FTC scanner.

Late on Wednesday, Israel's Teva confirmed it had agreed to stop all shipments of the generic drug, while Scottsdale, Arizona-based Medicis agreed to release Teva from liability arising from prior sales of generic Solodyn. [ID:nN18470880]

However, earlier the same day, Medicis said its petition to block three companies, including Teva, from launching a copy-cat version of Solodyn in the next 30 months was rejected by the U.S. Food and Drug Administration.

"The handicap Medicis has is that they don't have a 30-month stay. So whatever generic company comes in they are going to have to settle with them to avoid future competition," Collins Stewart analyst Louise Chen said.

Medicis shares, which closed down 10 percent Wednesday, were trading up 23 percent at $11.87 Thursday afternoon on the New York Stock Exchange. They touched a high of $13 earlier. (Editing by Himani Sarkar)