Glenmark and Medicis have agreed to jointly develop a product from the former’s pipeline to treat acne. Medicis will pay $5 million upfront to Glenmark and further payments will happen if development milestones are achieved. If the drug reaches the market, they will share royalties.

The two companies have also decided to settle the patent challenge filed by Glenmark Generics Inc., a US subsidiary of Glenmark Generics Ltd (GGL), which in turn is the Indian subsidiary of Glenmark. The generics business is housed under GGL.

Under the settlement, Glenmark will withdraw its patent challenges. It will get to launch Vanos in December 2013, or earlier. The product’s patents otherwise expire in 2021 and 2023.

A similar deal had been struck between Medicis and Perrigo Israel Pharmaceuticals Ltd in April, for the same product. Thus, Glenmark will share the market with Perrigo and Medicis. The revenue of this product has not been disclosed, but the non-acne dermatologicals segment of Medicis had sales of $96 million in the nine months ended September. And Vanos is a key contributor to this segment.

Glenmark will also launch the generic version of Loprox immediately—this product segment had $8 million in annual sales. But Medicis said in a post-results conference call with analysts that this product is seeing a sharp decline in sales.

The real benefits for Glenmark are dependent on the out-licensed product making it to the US market and, secondly, when it launches the generic version of Vanos in 2013. The upfront payment in the licensing deal is relatively small compared with the size of Glenmark’s revenue at Rs590 crore in the quarter ended September. It will be a straight addition to profit, however. Also, litigation typically adds to costs, even as the outcome remains uncertain, but cease after a settlement.

Glenmark had six potential first-to-file Para IV applications (patent challenges) filed as of September, holding out hope for more share price triggers. After initially rising by around 6%, its share price ended the day up by 2.3%, which is in line with the benefits accruing from the settlement.

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