PRETORIA The world's richest drug companies were poised on Wednesday to finally withdraw from a landmark South African court case over patented AIDS drugs after suffering a public relations disaster.

The case was to resume on Thursday amid growing expectations that 39 companies had decided their challenge of a South African law on importing cheaper generic AIDS drugs had backfired in the face of growing protests.

British charity group Oxfam said most of the firms seeking to defend their patent rights had already decided to reach a settlement with the South African government and drop the case.

Oxfam and other groups have slammed the industry for putting profits ahead of lives at a time when HIV-AIDS is afflicting more than 25 million Africans, a tiny fraction of whom can afford drugs.

"We understand that 37 of the 39 companies have pulled out of the case and the dispute now centers on who amongst the drug firms will settle the legal bill," Oxfam Senior Policy Adviser Kevin Watkins told Reuters.

The trade association representing the firms said it would hold a news conference on Thursday at noon (1000 GMT), just two hours after the scheduled resumption of the court hearing.

Plans for the news conference increased expectations that the drug firms would announce a deal with the South African government.

Discussions Continuing

The court postponed the case on Wednesday, saying there were discussions underway that could lead to a settlement.

"As discussions are still going on, the case is adjourned until 10 a.m. tomorrow," said Judge Bernard Ngoepe.

Fanie Cilliers, a lawyer for the Pharmaceutical Manufacturers' Association of South Africa (PMA) said: "We requested the delay so common ground can be found for a settlement."

The court action was brought by drug firms including Glaxosmithkline, the world's largest supplier of HIV-AIDS medicines. The other major makers are U.S. firms Merck & Co and Bristol-Myers Squibb, Swiss Group Roche and unlisted German group Boehringer Ingelheim.

A pharmaceutical industry source said the 39 companies challenging South Africa were likely to drop their case.

"There is a good chance that a settlement will be reached. in the case of a settlement there would have to be give and take on both sides," the source said.

An official in South African President Thabo Mbeki's office said a settlement was imminent. "Yes, it's happening. That's why I have been called here to the court," the official said.

Watkins said the case was a public relations disaster for the drug makers.

"The public cost to the companies of continuing the case has been driven through the roof by public campaigning.

"Secondly, they didn't have a case. A lot of people in the industry felt uncomfortable with it right from the start," Watkins said.

Strong Opposition

Former president Nelson Mandela joined the fray on Sunday, accusing the companies of exploitation and saying they were wrong to use court action to protect their profits.

"In court, they would have had to give information on their pricing and their research and development spending and they never wanted to disclose that," said Ellen 't Hoen, a spokeswoman for Medecins Sans Frontieres, one of the groups backing the government.

The case is seen as a test of the ability of developing countries to secure access to sustainable supplies of generic drugs, particularly those vital to combat aids but too costly for all but a tiny minority in the poorest countries.

The government argues that the disputed medicines and related substances control amendment act is vital to meet its constitutional duty of providing basic health care to the millions of its people denied such services under apartheid.

The PMA says patents have to be honored to ensure that future research into the next generation of drugs can be funded.