Launching of omeprazole generic in the US market by Schwarz is doubtful now although it has a tentative approval according to an international analyst. Both Andrx Corp. and Genpharm Inc having the first-to-file status for omeprazole in the US market have lost their launch right in the recent court case. And Shwarz has only a tentative approval, not a final marketing approval from the US FDA.

This issue has no precedent. As per current American law, other generic companies can launch only after the first-to-file para IV applicant finishes its 180-day exclusivity. As per a new law, which is under process in the US parliament, rolling exclusivity is allowed. Analysts, therefore, wonder whether Shwarz will get permission under this law.

If Schwarz does not get the permission, the only route available to it is to tie-up with the first-to-file applicants Andrx and Genpharm to market the product. While Andrx and Genpharm are quite certain of appealing against this verdict, Schwarz can join hands with them.

When it comes to production capacity, of the generic companies, it is only Andrx that has invested heavily for a $100 million omeprazole formulation plant. If Schwarz ties up with Andrx and does not have sufficient capacities, there is a possibility of Andrx taking the technology from Schwarz and producing at its huge facility. If this happens, there is a possibility of the bulk being sourced from Cipla.

But there is a catch. While there is likelihood of AZN appealing against Schwarz because of its huge business at stake and a judgment from the Federal Circuit court is expected to take between 12 and 18 months, there is no certainty that Schwarz would emerge a winner again.

Instead of the generic exclusivity commencing from this judgement (which was expected to go in favour of generic companies) and a horde of players entering post the end-of-the 180-day generic exclusivity, there is a possibility of only Schwarz entering the market in next couple of months and being the only generic player in this drug for a couple of years.

The market for such a big product is better shared by two players rather than four to eight players. Thus the timing of launch by Schwarz is an issue - could be from next one to two months or in four to six quarters.

According to an analyst, Schwarz could be the only generic for quite some time as proving AZN's patents invalid is difficult and each generic company would now have to prove non-infringement with respect to AZN's product as also Schwarz's product, which could mean a complex litigation.

If Shwarz is able to hit the US market with its product, then Ranbaxy could be an indirect beneficiary, as it had earlier outlicensed its BPH molecule to Schwarz and this cash flow from omeprazole may allow Schwarz to invest more into RLL's BPH molecule.

Kremer's Urban Development Co. (KUDCO), the US generic drug business of the Schwarz Pharma Group, achieved a critical court victory for its generic version of AstraZeneca's blockbuster drug Prilosec (Omeprazole). A US District Court found that KUDCO's formulation of Omeprazole does not infringe AstraZeneca's patents.

KUDCO's product is a bioequivalent generic version of AstraZeneca's anti-ulcer drug Omeprazole, which sold in the US under the brand name Prilosec for the treatment of gastric/duodenal ulcers, gastro-oesophageal reflux disease (GERD) and erosive oesophagitis.

As stated above, other generic companies may take more than two to three years to prove non-infringement and as Schwarz has the time it will have to take a very "considered view." Schwarz would also have to consider the fact that AZN is replacing Prilosec (omeprazole) with Nexium (chiral product launched in Feb'2001) and also the OTC product (that is expected to hit the market in next 3-4 quarters). Schwarz may tie-up with Andrx/ Genpharm, await the outcome of AZN's appeal while building up its capacity. The losers from this judgement are the patent challengers - Andrx, Genpharm and Dr Reddy's Laboratories Ltd and Cipla Ltd, the bulk drug supplier to Andrx, who were awaiting the end of the 180-day exclusivity to launch their generic.