NEWS

The Elan Corporation said today that it had settled its legal battle with King Pharmaceuticals of Bristol, Tenn., over the sale of rights to two of Elan's drugs in the United States to King.

King had tried to back out of the original deal, which included the transfer to King of a 375-member American sales force for the two drugs -- Sonata, a sleeping pill, and Skelaxin, a muscle relaxant. Under the settlement, King will go through with the purchase, but on more favorable terms than before: it will pay $750 million instead of $890 million. King agreed to pay Elan some continuing royalties on the drugs and a bonus if Skelaxin, a 40-year-old drug, retains patent protection through next January.

The settlement comes five days after hearings in Elan's lawsuit against King to force the completion of the sale were to have begun in New York State Supreme Court. The hearings were unexpectedly postponed last week.

Elan badly needs the cash it will reap from the deal to pay down debt. Investors reacted to the settlement by bidding Elan's stock up 8.6 percent to 4.06 euros ($4.75) a share in Dublin. A share of King fell 25 cents, to $12.99 in New York.

''The foundation was there, certainly, for some dialogue, for a win-win situation,'' G. Kelly Martin, Elan's chief executive, said in a telephone interview today from his home in California. ''Neither King nor ourselves really wanted to spend three months in litigation.''

In a statement, Kyle P. Macione, president of King, called the deal ''a transformational event for our company'' that will allow it ''to compete even more effectively in the primary care marketplace.''

King balked at the original agreement in March after the Federal Trade Commission began an inquiry into how Elan had marketed Skelaxin. But analysts said that King might have been using the inquiry, which was dropped by the commission on May 8, as a pretext to escape a deal that it had come to believe was overpriced. The two drugs had combined sales of $238 million in the United States last year.

Elan needs to raise $1.5 billion by the end of 2003 to pay back part of its $2.6 billion in debts and other commitments. The sale puts Elan over its goal, the company said today.

''It's potentially a billion-plus transaction for Elan over the life of the contract,'' when the royalties and other payments are included, Mr. Martin said. Even so, he said, Elan expects to sell off more assets in the next few weeks. ''We want to continue to streamline the business,'' he said.

Analysts expressed relief that the settlement removed some uncertainty from Elan, which was the most valuable public company in Ireland in 2001, but has since lost more than 90 percent of its market capitalization and now ranks ninth. ''The market is looking at this from a liquidity point of view,'' said Peter Frawley, an equity analyst with Merrion Stockbrokers in Dublin.

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