The smoke has begun to clear from the patent disputesbetween transdermal nicotine patch developers withThursday's announcement of out-of-court settlements betweenAlza Corp., Marion Merrell Dow Inc., Elan Corp. plc andAmerican Cyanamid Co.

Elan and marketing partner Cyanamid agreed to withdrawtheir patent infringement suit filed against Alza and itsmarketing partner, MMD. Alza and MMD withdrew theircountersuit.

The parties said the settlement would have no impact on thefinancial statements of any of the companies. Further detailsweren't disclosed.

"They've dropped the lawsuits, but you can bet they made adeal," said David Steinberg, an analyst at Volpe, Welty & Co. "Inall of these lawsuits there are winners and losers because somehave better patent positions than others. Over time you may beable to get a more definitive picture of the deal. There areways of extracting financial concessions that don't always showup on the income statement."

Nevertheless, Steinberg said that both Alza and Elan werewinners, in part because such lawsuits require a largecommitment of money.

MMD posted $55 million in patch sales in the first quarter.Cyanamid doesn't release figures, but Steinberg estimated salesat $10 million to $20 million. The third patch maker, Ciba-GeigyCorp., had $116.5 million in sales. Unmet demand for thepatches is running at more than $100 million, he said.

Other lawsuits are still pending. Elan has sued the fourth patchmaker, Cygnus Therapeutic Systems Inc. (NASDAQ:CYGN). Thatsuit is in the discovery phase, said Elan spokesman ThomasRedington. Cygnus' patch, which will be sold by the Parke-Davisdivision of Warner-Lambert Co., has been approved but won'tbe on the market until the third quarter.

Ciba-Geigy has sued Elan and Alza, both of which havecountersued. The Elan suit is in discovery, Redington said. Nocourt date has been set in the Alza suit, according to Alzaspokeswoman Bonnie Burdett.

Elan (AMEX:ELN) gained 75 cents to $49.88 and Alza rose $1.75to $45.50. Cygnus picked up 13 cents to $15.50. -- KarenBernstein

(c) 1997 American Health Consultants. All rights reserved.