Mylan Laboratories

(MYL) - Get Report

has received approval from federal drug regulators to manufacture and market a generic version of BuSpar, an anti-anxiety drug made by

Bristol-Myers Squibb

.

Generic drugmakers like Mylan have been engaged in a war against brand-name drugmakers, who have used every legal maneuver in the book to delay expiration on their lucrative drug patents. The stakes are high -- 18 brand-name drugs with $37 billion in sales are set to lose patent protection in the next five years.

Mylan and Bristol-Myers

(BMY) - Get Report

have been sparring over BuSpar since last November, when the patent on the drug was supposed to expire. The case eventually ended up in federal court, which decided in Mylan's favor on March 13.

That decision, and the revocation of a temporary stay on Tuesday, led the

Food and Drug Administration

to grant Mylan approval on Wednesday afternoon to make and market a generic tablet form of BuSpar (buspirone hydrochloride).

Mylan said today it will launch the new product immediately, although sales will not significantly affect the company's fourth quarter, which ends March 31.

"Mylan has overcome significant legal and regulatory obstacles to bring buspirone to the marketplace," said Mylan CEO Mike Puskar, in a statement. "Today, Mylan won a significant victory for our industry as well as the consumer."

The generic version of BuSpar will cut deeply into Bristol-Myers' sales, which reached $709 million for the drug in 2000, an increase of 17% over the previous year.

Barbara Ryan, drug analyst at

Deutsche Banc Alex. Brown

, estimates that a falloff in BuSpar sales will reduce Bristol-Myers' 2001 earnings by 3 cents per share, and 2002 earnings by 6 cents per share.

But she also believes that Bristol-Myers knew it was going to lose the BuSpar case, and was planning accordingly to avoid missing consensus earnings estimates. (Ryan rates Bristol-Myers a strong buy and her firm has not done underwriting for the company.)

Mylan closed Wednesday up $1.86, or 8%, to $24.98. Bristol-Myers was up 41 cents to $58.67.