AstraZeneca Gains Victory In Ruling on Prilosec Patent

Judge Rules Andrx, Two Other Drug Firms
Infringed on Patent for Heartburn Treatment

By Colleen Debaise

The Wall Street Journal, October 12, 2002

In a major patent-extension case, a federal judge ruled that three generic-drug makers infringed on AstraZeneca PLC's patent on Prilosec, a top-selling heartburn treatment.

Prilosec, the blockbuster purple pill that last year accumulated sales of nearly $6 billion, has been at the center of the debate over legal and regulatory moves by some major drug makers to delay generic competition against big sellers. AstraZeneca's original patent protection on Prilosec ended in October 200l, but the company sought addition protection from generic competition based on a special formulation for the drug.

The 277-page opinion, issued late Friday by U.S. District Judge Barbara S. Jones, found that generic-drug maker Andrx Corp. and two other companies infringed on those formulation patents. Most industry watchers hadn't expected AstraZeneca to prevail.

The judge ruled, however, that another drug maker, Kudco, a unit of Schwarz Pharma AG of Germany, doesn't infringe on AstraZeneca's patents, although it's far from clear how soon that company would be able to sell a generic Prilosec.

The decision is a major blow to Andrx, a Fort Lauderdale, Fla., company that last year won regulatory approval to market a less costly copy of Prilosec. An Andrx spokeswoman said the company is "exceedingly disappointed" with the court's ruling, and its lawyers are continuing to review the decision. Andrx plans to release a detailed statement before the market opens Monday.

On Thursday, Andrx shares had jumped 13% on anticipation of a court ruling, with investors seeing a different outcome in their tea leaves. On Friday, prior to the ruling, the shares were off 73 cents, at $19.99 in 4 p.m. Nasdaq Stock Market trading.

AstraZeneca American depositary shares were up $1.17 at $32.55 in 4 p.m. New York Stock Exchange composite trading Friday prior to the ruling.

The patent trial began in December 2001 and ended in June. AstraZeneca went to court to seek extended patent protection for a special formulation of Prilosec in which a subcoating layer is inserted between the core of the drug's active ingredient, omeprazole, and the pill's outer coating. The subcoating protects the drug from being broken down quickly by harsh acids in the stomach.

AstraZeneca's generic challengers -- which included Genpharm Inc., an affiliate of Germany's Merck KgaA, and Reddy-Cheminor, a unit of India's Cheminor Drugs, in addition to Andrx and Schwarz Pharma -- had argued that the formulation patents were invalid.

AstraZeneca applauded the decision. "It vindicates our belief in our intellectual property," said Rachel Bloom-Baglin, a company spokeswoman. She wouldn't speculate on how the decision could affect AstraZeneca's bottom line.

Kudco's version of Prilosec is already approved by the Food and Drug Administration. In the court case, Kudco had argued that it coats omeprazole -- the generic version of Prilosec -- with a nonalkaline substance, and that it has its own patent on this method, valid until 2016. It's not clear how soon Kudco would be able to put its version of Prilosec on the shelves. Andrx currently has exclusive rights under FDA rules to market its copy of Prilosec for six months. But with those plans stymied by Judge Jones's ruling, the launch of any generic version of Prilosec may be stalled if Andrx chooses to appeal the ruling.

Kudco said it is "evaluating how to make its product available to patients in the most expeditious manner."