Pharmaceuticals Company Settles Suit With Baxter

Newport Pharmaceuticals International Inc. said Thursday it has settled a breach-of-contract lawsuit involving its 1987 acquisition of a mail-order pharmacy business from Caremark Inc., a home health-care company formerly based in Irvine.

Judy Archbald, Newport Pharmaceuticals’ general counsel, said a settlement agreement signed Wednesday calls for Newport Pharmaceuticals to receive $4 million from Baxter Corp., the giant Illinois health-care conglomerate that now owns Caremark.

Baxter will pay Newport Pharmaceuticals $650,000 and purchase 662,526 shares of a newly created class of preferred Newport Pharmaceuticals stock for an additional $3.35 million cash. The preferred stock, which is not eligible for dividend payments, can be converted to common stock in two years, Archbald said.

In its lawsuit, filed in January, 1988, Laguna Hills-based Newport Pharmaceuticals sought $9 million in damages from Caremark and Baxter.

Newport Pharmaceuticals claimed that when it bought Caremark’s mail-order pharmacy subsidiary, America’s Pharmacy, in April, 1987, Caremark promised not to reenter that business. But shortly thereafter, Newport Pharmaceuticals contended, Caremark breached its agreement by merging with Baxter, which operates a directly competing mail-order pharmaceuticals subsidiary.

Archbald said America’s Pharmacy, which offers a low-cost, mail-order drug service as a component of health insurance plans, has become the major part of Newport Pharmaceuticals’ business. Last year, it generated $30 million of the firm’s $39 million in revenue.