Sepracor Inc. has entered into a settlement and license agreement with Breath Limited (Breath), an Arrow Group subsidiary, to resolve the patent litigation involving Sepracor's Xopenex brand levalbuterol HCl inhalation solution products (1.25 mg/3 mL, 0.63 mg/3 mL and 0.31 mg/3 mL).

The agreement permits Breath to launch generic versions of these Xopenex inhalation solution dosages under terms of an exclusive license commencing on August 20, 2012. Upon launch, Breath would pay Sepracor a double-digit royalty on gross profits generated from the sales of generic versions of these Xopenex inhalation solution dosages. The parties will promptly file a dismissal without prejudice in the US District Court for the district of Massachusetts that will conclude this litigation.

Sepracor and Breath also contemporaneously entered into a supply agreement whereby, effective August 20, 2012, Sepracor will exclusively supply levalbuterol HCl products (1.25 mg/3 mL, 0.63 mg/3 mL and 0.31 mg/3 mL) to Breath, under Sepracor's NDA for a period of 180 days and on a non-exclusive basis for a period of time thereafter. In addition to the royalties described above, Breath will pay Sepracor on a cost plus margin basis for supply of the levalbuterol HCl products.

Both the exclusive license under the settlement and license agreement and the exclusive supply obligations under the supply agreement could become effective prior to August 20, 2012 if a third party launches a generic version of those dosages of Xopenex inhalation solution or if the parties otherwise mutually agree.

"We are very pleased to have reached a resolution of our dispute with Breath, which allows both parties to avoid the uncertainties and significant expenses related to complex patent litigation," said Adrian Adams, president and CEO, Sepracor Inc. "With this lawsuit behind us, Sepracor can continue to focus on leveraging the many opportunities that lay ahead with respect to our current product portfolio and our growing research and development pipeline, in addition to our efforts directed toward achieving success with the recently launched Omnaris nasal spray product and the expected launch of Alvesco inhalation aerosol later this year."

The settlement agreement is a final settlement of the Breath litigation. The settlement with Breath does not end all disputes related to generic Xopenex inhalation solution products, as litigation against Dey L.P. and Barr Laboratories, Inc. remains pending. In compliance with US law, the settlement and license agreement and supply agreement will be submitted to the US Federal Trade Commission and Department of Justice and are subject to their review.

"We are very pleased to be able to settle this matter," said Ian McAffer, managing director, Breath Limited. "This settlement will provide us with the certainty of being in a position to introduce versions of the Xopenex Inhalation Solution products on a date certain without the burden of litigation."