Glaxo whacked by copy-cat ruling

LONDON, England -- GlaxoSmithKline, the world's second-largest drug maker, saw its stock slide to a two-year low after U.S. court quashed patents on its top-selling antibiotic drug.

Its stock dived more than 6 percent, or 105 pence, to 1,499 pence at the start of London trading on Friday.

The company (GSK) warned the decision could dent earnings per share growth if generic drug makers start producing cheaper copycat versions of its Augmentin drug, which has global sales of $2 billion, including $1.3 billion in the U.S.

Generic drugmakers -- Geneva Pharmaceuticals, an affiliate of Novartis, Teva Pharmaceutical and Ranbaxy Laboratories – bought the case against Glaxo, calling for the invalidation of patents so they could introduce cheaper rival drugs.

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Geneva has already received final approval from the U.S. Food and Drug Administration for its version. But Glaxo warned it would sue any company that launched cheaper versions if its appeal was successful.

"If a generic version of Augmentin were to be launched prior to the outcome of the appeal and GSK is successful in its appeal GSK would seek to recover damages for its lost profits," Glaxo said in a statement on Friday.

Glaxo's three patents expire in June, July and December of this year. Without generic competition for Augmentin, Glaxo said its earnings guidance is unchanged: earnings per share growth in the mid-teens in 2002 and low-teens or better in 2003.

But if rivals launch generic versions of the antibiotic before the appeal is decided, the company said its EPS growth would fall to around 10 percent in 2002 and to the high single digits in 2003.

"This is a victory for the generic companies and a lot of people were expecting it,'' Michael Colon, an A.G. Edwards & Sons analyst, told Reuters. Even so, he said Teva has already acknowledged it does not expect to launch its copycat until at least next year.

"Teva is a big player, so I would expect it to get a big piece of the business,'' said Colon, who declined to speculate how much revenue copycats might fetch.

Glaxo's U.S. shares fell $1.56, or 3.3 percent, to close at $46.39 on the New York Stock Exchange on Thursday after the decision.