Teva and GSK have been fighting over the validity of the Avandia patents since 2003 when GSK filed a patent infringement suit against Teva's and Dr. Reddy's Laboratories' (NYSE: RDY ) separate proposals to market a generic version of the blockbuster diabetes treatment. Teva and Dr. Reddy would share the first-to-file six months of marketing exclusivity over Avandia-related products if they were to prevail in court.
GSK's claim has been that the patents on Avandia don't expire until at least 2012, and possibly not until 2015 for some forms of the drug in the U.S. The European Union patents are set to expire in 2013 and 2014.
The Solomon-like settlement deal allows Teva to start marketing generic forms of Avandia and its related combination products in the first quarter of 2012. This seems like a safe compromise for Teva, because rather than risk losing in the courts and having to possibility wait until 2015, it now gets to safely launch at a compromise date.
In the first six months of the year, sales of Avandia and its combination products were down slightly year over year to $1.5 billion worldwide, with $1 billion of those sales coming from the U.S. Avandia-related products accounted for nearly 8% of GSK's total pharmaceutical division sales for the first half of the year.
GSK isn't out of the woods yet in regards to the validity of the Avandia patents, as there's no word that Dr. Reddy's has given up in the ongoing U.S. suit over the Avandia patents, but, with one challenger to the patents now gone, GSK is one step closer to securing one of its top franchises.