Glaxo settles Novartis dispute

Glaxosmithkline, the UK's biggest drug maker, has settled a legal dispute with its European rival Novartis, which it accused of using a secret strain of bacteria stolen from GSK laboratories by a disgruntled employee 14 years ago.

Novartis has agreed to pay a "single digit percentage" royalty on sales of its version of GSK's antibiotic Augmentin for the next four years.

The victory for GSK will soothe some of the pain from the loss of patent protection for Augmentin, whose sales have collapsed since rivals started selling cheap copycat versions last year.

Analysts, however, said the sums involved would not be material to either GSK or Novartis. GSK is still pursuing two other generic drug manufacturers - Teva of Israel and India's Ranbaxy - for using the strain, which it claims they ought to have known was stolen.

The UK giant is also still hoping to reverse the loss of its patent protection on Augmentin and the verdict in that separate legal battle is due from the US courts imminently.

GSK's Augmentin sales were down 42 per cent in the first three months of the year. The company's shares, which were down 21p to 1,186p yesterday, are some 25 per cent below their level when Augmentin's patents were overturned last year.

Jean-Pierre Garnier, chief executive of GSK, is under pressure to show he can replace revenues from off-patent drugs with new products from the clinic.

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