By Matthew Willett

SangStat Medical Corp. has reached settlement on a suit brought by Novartis AG alleging patent infringement by SangStat in the marketing of its liquid cyclosporine product, SangCya.

SangStat, of Fremont, Calif., and Novartis, of Basel, Switzerland, agreed to a global licensing agreement whose terms are confidential, but SangStat President and CEO Jean-Jacques Vienaime indicated the agreement is not financially oriented.

"We've decided to keep the terms of the settlement confidential," Vienaime said. "What I can tell you is that the terms will have no material financial impact on SangStat this year or in coming years. Sales of SangCya are very small, and if money was exchanged it would be a small amount."

Vienaime said the settlement was motivated mostly by mounting legal fees and lagging sales of the orally administered liquid cyclosporine, which accounted for only 4 percent of SangStat's revenues this year.

"The value to us is that this year, in quarter four, we can save $5 million to $6 million in legal fees. For a company our size that's very substantial," he said.

The company will continue to market its immunosuppressive drug SangCya, an oral liquid cyclosporine, in Europe, where Vienaime said the company is actively marketing the product in the United Kingdom and Germany and seeking approval in Italy and Spain.

The liquid formulation of SangCya was approved in the U.S. in November 1998 after being judged bioequivalent to Novartis' Neoral, and Novartis filed suit against SangStat two months later.

A month after the lawsuit SangStat and Abbot Laboratories, of Abbott Park, Ill., entered into a $50 million agreement for the co-promotion and distribution of the drug. SangStat will continue to market a capsule form of the drug.

SangStat's stock (NASDAQ:SANG) gained $1.50 Friday to close at $18.50.

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