UPDATE 2-Nigeria state, Pfizer to settle out of court -lawyers

* Nigeria’s Kano state, Pfizer reach broad agreement

* Details remain to be worked out (Adds quote, background)

KANO, Nigeria, April 3 (Reuters) - Nigeria's Kano state and drugmaker Pfizer Inc PFE.N have agreed to the broad terms of an out-of-court settlement in a multi-billion-dollar lawsuit over a 1996 drug trial, lawyers for both parties said on Friday.

The northern state of Kano sued the world’s largest drugmaker in May 2007 for $2 billion in damages over the testing of the meningitis drug Trovan, which the authorities say killed 11 children and left dozens disabled.

“I want to report that broad and principal fundamental agreement has been reached between Kano state government and Pfizer,” Pfizer’s lead counsel in the case, Anthony Idigbe, told reporters after a court hearing.

The New York-based firm has denied all charges and says meningitis, not Trovan, killed the children or damaged their health. It said Trovan saved lives and was as effective as a more established drug used for comparison in the study.

Nigeria’s federal government sued for an additional $6.5 billion in 2007 over the drug trial, though sources close to the negotiations have said it is expected to withdraw its case if Kano reaches a settlement.

Sources close to the negotiations told Reuters on Wednesday that the two sides were nearing a $75 million agreement, including the payment by Pfizer of $10 million legal fees, $30 million to Kano state and $35 million to victims and families.

The company, which has repeatedly said it hoped to reach an out-of-court agreement, said on Wednesday there was no final deal yet as there were still issues to be resolved, including how to “prevent any misappropriation of funds”.

“We have agreed in broad principle for a settlement. We will work together on the details,” Kano state Attorney General Aliyu Umar told reporters on Friday.

The civil and criminal cases launched by the Nigerian authorities have grown into a tangle of unresolved petitions and side issues, dragging from one adjournment to the next.

Court sources said a year ago that Pfizer had proposed to pay $10 million in compensation, rehabilitate the hospital where the Trovan study took place, and upgrade Kano’s state-owned drug manufacturing company.

But Umar said at the time that the government wanted a better package for the victims.

Judge Shehu Atiku said the next hearing in the Kano case would be held on May 25 but said there was "a strong indication that the case is about to come to an end". (For full Reuters Africa coverage and to have your say on the top issues, visit: ) (Writing by Nick Tattersall, editing by Will Waterman)