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Associated Press 03.26.07, 6:11 AM ET

Swiss pharmaceutical maker Novartis AG said Monday it will transfer a U.S.-based production facility for Betaseron to BayerSchering AG and launch its own version of the multiple sclerosis drug.

The German drugmaker will pay some US$200 million (euro150 million) for the transfer of production equipment, inventory and leasing of buildings at the site in Emeryville, California, according to Novartis (nyse: NVS - news - people ).

Bayer (nyse: BAY - news - people ) Schering will continue to pay Novartis royalties on worldwide sales of Betaseron - marketed outside the U.S. and Canada as Betaferon - until October 2008, when the original regulatory filing agreement expires, Novartis said in a statement.

Betaseron is marketed by Bayer Schering Pharma AG, which was created when Bayer AG acquired Schering last year. A 1993 agreement with Chiron, which Novartis acquired last year, covered the regulatory filing, development and supply of Betaseron. Novartis assumed Chiron's rights to the product and has continued to produce Betaseron.

Since then, both sides have been in discussions about the transfer of the Betaseron assets, Bayer Schering Pharma said, and this agreement resolves all outstanding legal actions between the parties regarding the drug.

"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 management board of Bayer Schering Pharma AG.

Novartis said its own-branded version of the multiple sclerosis drug is expected to be launched in 2009.

Bayer Schering will support Novartis in the filing process of the Novartis-branded version of the drug and supply the Swiss company with Betaseron for a double-digit royalty payment.

"This agreement gives us an opportunity to strengthen our neuroscience portfolio and build our presence in multiple sclerosis," Novartis Chief Executive Thomas Ebeling said in a statement.

Novartis said it plans to maintain its vaccines and diagnostics division in Emeryville, California, including the headquarters for its diagnostics business.

The agreement with Bayer Schering, which is subject to regulatory approval, is expected to be closed by the third quarter this year.

Novartis shares were flat at 69.60 Swiss francs (US$57.12; euro42.86) in Zurich. Bayer Schering Pharma shares fell 0.3 percent to euro104.45 (US$138.80).