Swiss drugmaker Roche has settled a long-standing disagreement with US firm Gilead Sciences over the influenza drug Tamiflu (oseltamivir).

Gilead originally developed Tamiflu and licensed it to Roche in 1996 in return for royalties on sales. But, in the summer, the US company insisted that its Swiss partner had not done enough to promote Tamiflu since its launch six years ago, and entered into an arbitration procedure to resolve the dispute.

Since then, Roche has been inundated with orders for Tamiflu as governments around the world lay in stockpiles of the drug for use in the event of a flu pandemic – which scientists say is overdue and could occur at any time. After sales declined by nearly a quarter last year, they have leapt forward in 2005 and the drug is on track for revenues approaching a billion Swiss francs.

Under the revised agreement, Gilead will retain the same royalty rate – between 14% and 22% depending on sales levels – but a clause that adjusted these payments depending on the cost of making the drug has been removed. The US firm will also be paid $62.5 million dollars in retrospective royalties, and will retain an $18 million payment that had been paid – and contested – by Roche.

As a result, Gilead anticipates receiving a royalty for Roche's full year 2005 Tamiflu sales in the range of 18%-19%. Moreover, the US firm also gets much more say in Tamiflu production – including outsourced production under license, which Roche has agreed to in order to boost capacity - via a joint committee set up by the two companies. Gilead also gets the option of co-promoting the drug in the USA.