A week is not normally a long time in patent disputes but it has been long enough for AstraZeneca and Teva to settle their difference over a generic version of the former’s asthma drug Pulmicort.

The two firms say they have entered into a settlement agreement about Teva’s generic version of Pulmicort Respules (budesonide inhalation suspension), which was approved by the US Food and Drug Administration last week. The Israel-headquartered firm immediately started shipping its product despite a pending patent lawsuit and AstraZeneca responded by getting a temporary restraining order in a New Jersey court and making plans for its own authorised generic to be shipped by Par Pharmaceuticals.

However a long drawn-out legal battle has been avoided and Teva concedes that AstraZeneca's Pulmicort patents are valid and enforceable and that its generic version of the drug infringes them. It has also agreed that it will not resume selling its budesonide inhalation suspension product until December 15, 2009 and then only under an exclusive licence granted by the Anglo-Swedish drugmaker.

AstraZeneca will receive a “significant undisclosed royalty” on sales of Teva's product, with “a marked step down in payments” if additional at-risk generic products enter the marketplace, the firms said. Teva has also agreed to pay an undisclosed sum in respect of damages resulting from the unauthorised launch last week, while the agreement provides that any product already shipped will remain in the market to be further distributed and dispensed. As a result of the deal, all patent infringement litigation against Teva has been dismissed, although AstraZeneca noted that a legal dispute over Pulmicort Respules against Breath Limited remains ongoing.

AstraZeneca added that said its agreement with Par to distribute the authorised generic version would be discontinued, though it will still sell Pulmicort Respules after Teva’s product hits the market. Chief executive David Brennan said the agreement “provides increased certainty and stability in our business and a clearer backdrop for our investment decisions while re-affirming the strength of our intellectual property,”

The company had only last week said that income for this year could be hurt by generic Pulmicort but has reiterated a forecast that earnings should be in the range of $4.90-$5.05 per share. The figure depends on the potential negative impact from Teva’s product and the small amount of authorised generic already in trade channels.

The deal has gone down well with investors and AstraZeneca shares were up 2.7% to £24.30 at 9.30 this morning, UK time