US court action hits Glaxo share price: British company 'confident of winning' battle over patents

SHARES in Glaxo fell 131 2 p to 534p in a rising market yesterday after the company confirmed that it was facing allegations of 'inequitable conduct' in a US court case challenging patents for Zantac, its biggest selling drug.

The allegation forms part of a legal defence by Novopharm, a Canadian manufacturer being sued by Glaxo over plans to market a generic ulcer remedy. The case, opening in North Carolina next week, is expected to last two weeks although the outcome will not be known until later this year.

Glaxo, chaired by Sir Paul Girolami, claims that Novopharm's plans are an infringement of its Form 2 patent for ranitidine hydrochloride, used to make Zantac, which accounted for a large proportion of Glaxo's pounds 1.43bn taxable profits last year.

Glaxo owns both the original and the Form 2 version which formed the basis of Zantac's development. However, patents for the first version are due to expire in December 1995, leading to widespread fears among investors of a flood of cheaper products from Glaxo's rivals.

However, the British company believes that Novopharm's planned drug is based on its Form 2 patent, which does not expire until 2002.

Novopharm is counter-claiming that the Form 2 version is 'inherent' in the basic patent and therefore not new. It also alleges that Glaxo misled the US Patents office in its application for the Form 2 patent and the patent is unenforceable. It accuses Glaxo of 'inequitable conduct' and says it failed to make proper disclosures at the time of filing for the patent.

The charges have been refuted by Glaxo, which said it was confident the case would be decided in its favour. 'Under US patent law it is presumed that a patent granted by the US Patent Office is valid,' it said. 'The onus therefore lies on Novopharm to demonstrate otherwise to the court by clear and convincing evidence.'

The company said that patent authorities in 60 countries had granted it a patent on Form 2 and no patent had been successfully challenged.

At stake is the world's best selling drug. Discovered by the company in 1976, Zantac's worldwide sales amounted to pounds 1.8bn last year, of which the US accounted for dollars 1.6bn.

Last week Novopharm, together with Barr Laboratories, lost a legal action against Wellcome, the British group which makes AZT, the Aids drug. The case was thrown out by the North Carolina court which ruled that there was 'overwhelming and conclusive evidence' that Wellcome had been first to think of using AZT for the treatment of Aids.

British Biotechnology announced the start of the first trial of its Aids treatment, p24-VLP. The drug is to be tested on 300 patients with advanced HIV infection. Dosing has already begun in Britain and Australia.

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