Roche, main producer of the much-sought-after bird flu drug Tamiflu (osteltamivir), has settled a dispute with the drug's inventor Gilead Sciences Inc. over production and royalties yesterday.

Under to the agreement, Gilead Sciences Inc will get a greater say in plans to increase production of the drug by farming out parts of the process to third-party producers such as generic drug makers.

The report says, Roche has also waived the US company's obligation to shoulder the burden of certain manufacturing costs, meaning that Gilead is no longer exposed to soaring prices for star anise, a Chinese spice that yields the base ingredient for Tamiflu.

Roche will also pay Gilead around $62.5 million in reimbursements for so-called cost of goods adjustments backdated to the start of 2004 and allow the US firm to keep a further $18.2 million it had already paid out.

Gilead had threatened in June to end a deal signed in 1996 under which Roche got an exclusive license to manufacture and sell the antiviral drug worldwide.

The US firm said Roche had failed to market the drug properly, particularly in the United States, and had not launched the drug as a treatment for seasonal flu in other countries.

Gilead's royalties will work out at 18 to 19 per cent for 2005, the firms said. Roche sold 859 million Swiss francs worth of Tamiflu in the first nine months of 2005, the report stated.