Judge sweeps aside AstraZeneca shield against Nexium competitor

AstraZeneca ($AZN) has been fighting a rearguard action against Hanmi Pharmaceutical's modified version of Nexium that threatens one of the few strong revenue sources AstraZeneca has right now. Japan's Hanmi is back on the offensive after a U.S. federal court lifted a stay on the launch of its product.

The FDA in August approved Hanmi's almost-copycat drug Esomezol, which uses a different salt form than AstraZeneca's stomach pill. Under terms of an earlier settlement reached by the two companies, that allowed Hanmi to launch its drug at-risk while they continue a patent battle. That means if Hanmi loses, it could face double damages. AstraZeneca countered by getting a stay in September that now has been lifted, paving the way for Esomezol to steal market share from Nexium in the U.S. And that is a real problem for AstraZeneca.

Total revenues for the company were down 4% last quarter, and its profit dropped 12% even though it has been slashing jobs and cutting other costs as it tries to rebuild its pipeline in the face of serious generic competition. Sales of its cholesterol treatment Crestor slid by 4% to $1.48 billion, as doctors moved patients to generic versions of Pfizer's ($PFE) rival drug Lipitor. Sales of Seroquel, its antipsychotic that went off patent last year, dropped by 31% to $438 million.

AstraZeneca pointed out today that because Esomezol is not exactly the same, it is not automatically substitutable for Nexium, a drug that generated nearly $4 billion in revenue for AstraZeneca last year. Nexium is pretty much on pace to do that again this year. It pulled in nearly $2 billion in the first half, up 5% from the same period in 2012. The company has been advertising it heavily, trying to squeeze as much out of it as it can before it goes off patent next year.

- here's the announcement