GlaxoSmithKline shares have fallen to a two-year low after a US court quashed patents for a top-selling antibiotic, paving the way for cheap, copycat versions to take sales from Europe's biggest drugmaker.
Glaxo plans to appeal the ruling by the Virginia court but warned that if generic versions of the drug, Augmentin, entered the market before the case was resolved there may be a "material impact" on earnings this year and next.
Drug firms around the globe are fighting legal battles to prolong the patents on their drugs in the face of increasing generic competition that threatens to erode profits.
Investment bank Merrill Lynch swiftly cut its recommendation for Glaxo to "neutral" from "buy". In early trading Glaxo shares were 6.9 per cent down at 1,499 pence, their lowest since March 2000.
Augmentin prevents bacteria from becoming resistant to penicillin. It has global annual sales of $2 billion including $1.3 billion in the United States.
Generic drugmakers Geneva Pharmaceuticals, an affiliate of Novartis AG, Teva Pharmaceutical Industries and Ranbaxy Laboratories had sued to invalidate Glaxo's patents so they could launch lower-cost versions of the antibiotic. Shares in these firms were all higher today.
