Generic Toprol-XL Hits Market

AstraZeneca shares are still higher.
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A generic drugmaker has begun selling cheap copies of a major

AstraZeneca

(AZN) - Get Report

medication, forcing the pharmaceutical giant to adjust its full-year earnings estimate and make a deal to ease the revenue damage.

But because AstraZeneca has been warning investors and analysts for several months about potential generic competition, its stock was absorbing the news, rising 0.4% to $57.21 Wednesday.

The drug is Toprol-XL for high blood-pressure, AstraZeneca's third-best selling product. The competitor is Eon Labs, part of the Sandoz generic-drug company, which is owned by

Novartis

(NVS) - Get Report

.

Even though AstraZeneca is still fighting to protect its patent in a U.S. court, Sandoz began selling a 25-milligram version on Monday. AstraZeneca says the 25-milligram pill accounts for about 20% of Toprol-XL's sales in the U.S. The company sells four dosage strengths.

For the first nine months of this year, Toprol-XL produced $1.11 billion in sales in the U.S., up 17% over the same period last year. When other markets are added, the drug's total nine-month sales were $1.41 billion.

Despite warning about generic Toprol-XL, AstraZeneca last month raised its

full-year earnings prediction to a range of $3.85 to $3.95. The estimate included 10 cents a share from Toprol-XL for the final two months of 2006, assuming no generic competition.

On Tuesday, after the markets had closed, AstraZeneca said its full-year EPS would fall to the lower end of that range. The company will make inventory adjustments worth $150 million, or 8 cents a share, that will be charged to the fourth quarter.

To offset some impact of Sandoz's action, AstraZeneca signed a deal with

Par Pharmaceuticals

(PRX)

to sell an "authorized generic" of Toprol-XL's 25-milligram dose.

A brand-name company sometimes uses this strategy of licensing drugs to other generic-drug makers, enabling it to get a royalty based on generic sales.

AstraZeneca will still sell brand-name Toprol-XL in the U.S. It also is continuing its U.S. court fight to protect its Toprol-XL patent, which expires in September 2007. AstraZeneca is suing Sandoz and two other generic-drug makers. There was no word on when or if the other companies would start shipping cheap copies of Toprol-XL.

Last January, AstraZeneca lost a federal district court decision on its Toprol-XL patent. The company's appeal is pending.