Investors are reacting positively to the news that AstraZeneca has reached an agreement with Ranbaxy and settled a patent lawsuit in the USA concerning the Anglo-Swedish firm’s blockbuster antiulcerant Nexium.

Under the terms of the settlement, Ranbaxy will be allowed to start selling its generic version of Nexium (esomeprazole) on May 27, 2014, which marks the expiry of two patents on the drug. AstraZeneca’s patents protecting Nexium have expiration dates that range from 2014 through 2019.

The two firms have also signed a separate agreement which will see the Indian drugmaker formulate a portion of AstraZeneca's US supply of Nexium from May 2010, with the active ingredient being manufactured from May next year. Ranbaxy also has granted the rights to distribute “authorised’ generic versions of AstraZeneca’s heart drug Plendil (felodipine), and the 40mg dose of Prilosec (omeprazole). Ranbaxy will be “compensated for its distribution services on standard commercial terms”, the firms noted.

AstraZeneca chief executive David Brennan said: “I believe that this agreement is the right business decision and gives increased clarity and stability to allow us to continue investing substantially in our growing pipeline”. He added that “we continue to have confidence in the strength of our patents and will vigorously defend our intellectual property”. AstraZeneca’s Nexium patent infringement litigations against Teva and Dr Reddy’s Laboratories remain ongoing.

The Ranbaxy settlement has had a dramatic effect on AstraZeneca’s stock this morning and by 10.15am, the shares had risen over 9.5% to £21.70. Nexium is a huge earner for the firm, and brought in $5.2 billion in 2007, but there were fears that a generic form could hit the market in the next few years. In February, Ranbaxy received tentative approval from the US Food and Drug Administration for its generic esomeprazole product.