EMERYVILLE, Calif. ( TheStreet) -- Onyx Pharmaceuticals ( ONXX) and Bayer stared down each other from across a courtroom -- and Bayer blinked first.

The two companies announced Wednesday a settlement in the lawsuit over the development and marketing of the cancer drug regorafenib. Onyx got the best of the deal.

Onyx filed the suit in May 2009, accusing its partner Bayer of duplicitous dealings around regorafenib, which is a close chemical cousin to the approved cancer drug Nexavar that the companies market jointly worldwide.

Bayer claimed regorafenib as its own, insisting Onyx had no rights to the drug. Onyx disagreed, claiming that regorafenib's development violated the Nexavar partnership agreement. A trial to decide the lawsuit began earlier this week.

Under terms of the settlement, Bayer will pay Onyx a 20% royalty on worldwide sales of regorafenib. Bayer will also pay a one-time $160 million fee in exchange for Japanese royalty rights to Nexavar, the companies said. A change-of-control provision in their partnership which gives Bayer additional rights to Nexavar if another party acquires Onyx was also eliminated.

Bayer retains control of regorafenib's clinical development and foots the bill for the drug's clinical studies.

Regorafenib is being studied in two phase III studies in advanced gastrointestinal stromal tumors (GIST) and advanced colon cancer, with results expected next year for the GIST study and late this year or early next year for the colon cancer study.

--Written by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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