Bayer deal opens way for Novartis own-label interferon beta 1-b

Bayer Schering Pharma, of Germany, has purchased from Novartis a biologics manufacturing facility in Emeryville, California, which is currently used to produce Bayer Schering Pharma's Betaseron for patients in the US.

Bayer Schering Pharma will manufacture Betaseron at the Emeryville site, keep full control of all manufacturing and process technology used in the production of Betaseron and will retain the facility's employees.

Novartis will transfer manufacturing responsibility for Betaseron (interferon beta-1b) including the Biologics License Application (BLA), by selling related equipment and property, as well as leasing certain buildings at the Emeryville site to Bayer Schering Pharma for a one-off payment of approximately US$110m.

To assure a smooth transition and safeguard continuous product supply for patients, Novartis will assist Bayer Schering Pharma in assuming responsibility for Betaseron manufacturing in Emeryville and will also help Bayer qualify another possible supplier of the product. In addition, Novartis will grant Bayer royalty-free licences under all patents and know-how used by Novartis in relation to Betaseron.

Bayer Schering Pharma will continue to pay Novartis royalties equivalent to those being paid currently on net sales of Betaseron manufactured by Bayer at the Emeryville facilities until expiration of the original regulatory filing, development and supply agreement in October 2008. After this date, no more royalties will be due to Novartis on the sales of Betaseron.

Bayer Schering Pharma will support Novartis in the regulatory filing process of a Novartis brand of interferon beta-1b. When approved by health authorities, Bayer Schering Pharma will supply this medicine to Novartis from 2009 forward and receive in return a double digit royalty payment from Novartis.

'In addition to improving the profitability of the Betaseron franchise through this transaction we believe a second independent brand will reinforce the existing growth of the global MS market,' said Arthur Higgins, chairman of the board of management of Bayer Schering Pharma.

In 2006, prior to the close of the Novartis-Chiron transaction, Bayer Schering Pharma exercised its option to acquire all Betaseron-related assets at the Emeryville site at fair market value. Since then, both sides have continued discussions about the transfer of the Betaseron assets.

The agreement is subject to regulatory consent and resolves all outstanding legal actions between the parties regarding Betaseron.