Prozac Settlement Lifts Eli Lilly

Eli Lilly and Co. shares rose Monday after the drug maker said it's reached a partial settlement in the patent dispute over the antidepressant Prozac.

Lilly (LLY) saw shares rise 4 to 84 1/4 after it said it agreed to pay a one-time $4 million reimbursement of legal expenses and litigation costs to generic drug companies Apotex Inc., Barr Laboratories (BRL) and Geneva Pharmaceuticals, who have attempted to win approval for a generic and cheaper form of Prozac.

Prozac had sales of $2.6 billion in 1997.

In the settlement, a U.S. district court prohibited Barr and Geneva from making a generic duplicate of the widely prescribed drug. In return, Lilly agreed to drop its willful infringement claims against the three companies.

By agreeing to drop claims of willful patent infringement against the three companies, Lilly was allowing the case to proceed to the U.S. Court of Appeals which is now expected to hear the case in early 2000.

"For about the cost of a trial, Lilly is in an even better position than if we had gone to trial and won," said Lilly's general counsel Rebecca Goss in a statement.

In a separate statement, Barr said the resolution allows it to speedily bring its challenge on the Prozac patent before the U.S. Court of Appeals, which could hear the case before the drug's 2001 patent expiration.

"If the Court of Appeals does not render a final decision, we will also retain our right to a jury trial for these claims," said Barr's chief executive Bruce L. Downey in a statement.

Barr shares fell 2 1/2 to 41 1/8 in recent trading.

Millions of Americans use Prozac to treat depression, bulimia, obsessive-compulsive disorder and other ills. Children and even pets down it to make their lives cheerier. A new indication for Prozac to treat a type of premenstrual syndrome is pending before regulators.

A generic form of Prozac could be discounted 30 percent below the price Lilly charges, which is about $60 a month, and thus erode Lilly's sales.

Already, generic competition has eroded Prozac sales overseas, causing a drop of more than 14 percent from a high of $627.4 million in 1995 to $538.1 million in 1997. Lilly is expected to announce year-end figures for 1998 on Thursday.