A share price fall of 4% on 19 December 2006, following an announcement of an adverse decision at the European Patent Office (EPO) against the substance patent for Nexium®, represents a value of about £1.5 Billion for a single patent.

Whilst the AstraZeneca share price may well rally when a full analysis of the Nexium® market and actual impact of the EPO decision are made, for now the significance is huge.

We are often asked how much a patent is worth and of course, short of referring the matter to an accountant expert in valuations, can struggle to provide a satisfactory answer, pointing as we might to possible revenue streams from different technical sectors and/or countries as being hugely influential in the value to a potential purchaser.

Here, however, the market has made up its mind decisively. The Nexium® substance patent was worth £1.5 billion in the AstraZeneca share price - an indication of the anticipated loss of profits due to fierce competition from generics manufacturers.

AstraZeneca has issued a statement that it "will defend and enforce its intellectual property rights protecting Nexium®" and moreover "has confidence in the intellectual property portfolio protecting Nexium®. This portfolio includes process, method of use and additional substance patents with expiration dates ranging from 2009 through to 2019. In addition to these patents Nexium® has data exclusivity valid to 2010 in major European markets."

Significantly therefore, AstraZeneca has prudently protected this important product with more than a single patent. Ask any successful entrepreneur about Intellectual Property and they will tell you of the need for a portfolio of rights, especially covering confidentiality, trade secrets, copyright, domain names and designs as well as the higher profile forms of IP of registered trademarks (AstraZeneca®, Nexium®, and Withers & Rogers® for example) and patents.

Nexium®is the brand name for esomeprazole, magnesium salt. The compound is one of a class of drugs known as proton pump inhibitors (PPIs), used to treat gastrointestinal ulcers and related conditions by reducing acid secretion in the stomach. Esomeprazole is the (-)-enantiomer of the well known PPI omeprazole (also marketed by AstraZeneca under the brand name Losec®). Compared to omeprazole, esomeprazole appears to demonstrate improvements in terms of reduced interpatient variability in response.

The Nexium® substance patent was opposed by Ratiopharm GmbH, primarily on the grounds that esomeprazole, magnesium salt lacked novelty and/or inventive step over prior art documents which described, on one hand, the isolation of esomeprazole and, on the other hand, the desirability of preparing salts (such as magnesium salts) of PPIs for improving their stability. Whilst AstraZeneca was able to convince an EPO Opposition Division in 2004 that the required novelty and inventive step were present, Ratiopharm appealed this decision and the European patent was finally revoked yesterday by a Technical Board of Appeal.

Karl Barnfather and Nicholas Jones
20 December 2006