By James Regan

Bayer said it would also grant Barr a license to market a generic version of its Yaz product. Both agreements would begin by July 1, the companies said in separate statements on Tuesday.

Barr last month won U.S. Food and Drug Administration approval to sell its generic version of Yasmin after it challenged Bayer's patent, but Tuesday's deal did not mark the end of legal action.

Bayer said it would continue to pursue an appeal against a New Jersey court's March decision invalidating Bayer's U.S. patent for Yasmin and said it would receive a larger share of Barr's revenue from the product if successful.

"The agreements allow us to participate in the U.S. market for generic oral contraceptives in partnership with an established player," Bayer HealthCare management board member Gunnar Riemann said in a statement.

Riemann added he expected Bayer's global women's healthcare business to continue posting high single-digit to low double-digit percentage annual growth rates in the coming years, thanks to products already on the market and "new, promising developmental products."

Yasmin had sales of 321 million euros ($498 million) in the United States alone in 2007. Yasmin and its related products Yaz and Yasminelle posted worldwide sales of 1.04 billion euros last year -- Bayer's largest product family by turnover.

LAUNCH ENABLED

Barr said the deal would enable it to launch its authorized generic versions of Bayer's Yasmin and Yaz oral contraceptives years before the patents protecting them expired.

"Although Bayer will continue to appeal the (court decision) that found the Yasmin patent invalid, these agreements ensure that we will be able to continue selling our generic versions of Yasmin and Yaz regardless of the outcome of that appeal," Barr Chairman and Chief Executive Bruce Downey said.

Bayer added that should it lose patent lawsuits in the United States against other companies concerning Yaz, it would then start supplying Yaz to Barr too for it to market a generic Yaz there in return for a fixed percentage of the revenues.

Shares in Bayer were 0.8 percent higher at 52.02 euros by 0832 GMT, putting them among the top gainers on a 0.5 percent softer German blue-chip DAX index <.GDAXI>.

"Despite a small impact on numbers, from a sentiment perspective this is good news for a number of reasons," Deutsche Bank analyst Michael Leuchten wrote in a note.

The accord removed a threat to Yaz ahead of Phase III trials of Bayer's Xarelto anticoagulant in a chronic setting in 2010, handicapped the possibility of a European Yasmin generic and stabilized and secured cash flows before the Xarelto results in 2010, he said.

Xarelto will initially be used in preventing blood clots among patients after knee- and hip-replacement surgery. The big commercial potential lies in using it to prevent strokes in people with atrial fibrillation, a common heart arrhythmia.

(Editing by Sue Thomas and David Holmes)