July 24, 2009 / 3:20 PM / 10 years ago

UPDATE 1-Teva, J&J settle oral contraceptive patent case

* Teva gains license to sell generic in 2015

* Teva pays royalty to J&J

* J&J up 0.8 percent, Teva rises 0.6 percent

By Lewis Krauskopf

NEW YORK, July 24 (Reuters) - Teva Pharmaceutical Industries Ltd (TEVA.TA) TEVA.O said on Friday it settled a patent infringement lawsuit with Johnson & Johnson (JNJ.N) over Teva’s U.S. generic version of J&J’s Ortho Tri-Cyclen Lo birth control pill.

As part of the settlement, Teva, which briefly sold its generic version earlier this month before ceasing shipments, obtained a license to re-enter the market on December 31, 2015, or earlier in certain circumstances. The product’s patent is set to expire in 2019, a J&J spokesman said.

Israel-based Teva, the world’s largest generic drugmaker, will also pay J&J a royalty based on sales of its generic that it shipped. Ortho Tri-Cyclen Lo had annual U.S. sales of about $400 million for the year ended in March, according to data provided earlier this month by Teva.

“This settlement compensates us for loss caused by their at-risk launch and recognizes the patent is valid and enforceable,” J&J spokesman Greg Panico said. Panico said the companies were not disclosing specific terms of the settlement.

Teva shares rose 0.6 percent in morning trading, while J&J climbed 0.8 percent.

Teva said on July 1 it launched its generic version after winning regulatory approval. It said then it would have 180 days as the lone generic — a right traditionally afforded to generic companies first to challenge patents.

But six days later, Teva said it ceased shipments pending the resolution of a preliminary injunction sought by J&J related to the patent infringement case against Teva.

During its launch, Teva was able to ship four to six months supply of its generic, Panico said.

The settlement comes as U.S. antitrust regulators and Congress are taking a closer look at patent settlements between brand and generic drugmakers amid allegations they shortchange consumers by delaying the arrival of low-cost generic drugs while the companies profit.

Many settlements that have drawn objections involved a payment from brand companies to generic firms — what critics call “pay-for-delay” deals. But Natixis Bleichroeder analyst Corey Davis noted the Teva-J&J settlement involved the opposite — a payment from Teva back to J&J.

“By not having any payments from the innovator, the (Federal Trade Commission) can have little basis to complain,” Davis said in a research note.

Teva said the settlement will not become effective until the U.S. District Court for the District of New Jersey overseeing the case upholds the validity and enforceability of J&J’s patent.

J&J shares rose 74 cents to $60.96 on the New York Stock Exchange. Teva shares were up 28 cents to $50.47 on the Nasdaq. (Reporting by Lewis Krauskopf; Editing by Derek Caney)

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