AstraZeneca faces battle over drug patent

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AstraZeneca, the UK's number two drug maker, is gearing up for a battle to defend patents on its leading ulcer drug, after a rival signalled it was developing a copycat version.

The Indian firm Dr Reddy has told the US regulator, the Food & Drug Administration, of its plans to manufacture a generic version of AstraZeneca's Nexium, which has sales of £5m a day and accounts for a sixth of the UK company's turnover.

It is thought that Dr Reddy could be prepared within six months to file for regulatory approval for its version of Nexium, and the product could be on the market by 2007. AstraZeneca insisted it had valid patents protecting the drug until 2015. The company is confident of defending Nexium against generic challenge, it said.

Analysts were yesterday predicting another vicious legal battle, mirroring that over Nexium's forerunner Losec, once AstraZeneca's best-selling drug.

The main ingredient of Losec lost patent protection in 2001, but AstraZeneca managed to keep copycat products off the market for almost a year by asserting patents over the way the drug was made. These were eventually ruled out by the courts, but not before AstraZeneca's salesforce had switched many doctors over to prescribing Nexium.

AstraZeneca attracted significant criticism over its actions, which meant the price of Losec stayed higher for longer.

In a research note to clients, analysts at Morgan Stanley wrote: "We assume that the earliest a generic Nexium be able to launch will be 2007, but in reality it is likely to take far longer than 30 months for a generic company to fight AstraZeneca in court. In a worst-case scenario, generic Nexium has a material impact on AstraZeneca's earnings from 2007 onwards."

Dr Reddy's filing of manufacturing details with the FDA emerged yesterday and sent AstraZeneca shares down 44p to 2,329p.

It comes at a sensitive time for the UK company, whose shares have tumbled to their lowest levels in more than a year. Another of its drugs, Seroquel - the fast-growing treatment for schizophrenia -, is also facing a generic challenge.

And there are growing concerns over the success of its new anti-cholesterol pill Crestor. Sir Tom McKillop, chief executive, has promised to spend "whatever it takes" to make sure Crestor wins a 20 per cent market share for such pills, known as statins, but controversy over its safety has capped its market share so far to 6 per cent.