Anglo-Swedish drugs giant AstraZeneca suffered its second patent challenge in less than a month today after India-based Ranbaxy Laboratories moved to try to produce a cheap generic rival to its blockbuster anti-ulcer and heartburn treatment Nexium.

In news that initially sent its shares down by more than 3 per cent, Astra said Ranbaxy had submitted an abbreviated new drug application to the regulator in the United States that challenged its patent rights to produce Nexium, the world's third-largest-selling prescription medicine.

Nexium has been a blowout success for AstraZeneca, with sales last year of $3.9 billion. Astra believes it holds the patent to produce the drug until 2018 at the latest.

But if Ranbaxy, which has gained a reputation as a company that takes on big drug-making incumbants, is successful in its bid it will provide a lower-cost alternative that is bound to threaten the dominance of Astra's drug.

Astra said that, following Ranbaxy's filing, it now had 45 days to file a patent infringement lawsuit against the company that would stop it producing the drug for two and a half years, or until a court found in its favour - whichever is the earlier.

As well as stating that Ranbaxy had agreed not to launch its new product before the 2007 expiry of other patents relating to Nexium, Astra said it "was evaluating Ranbaxy's notice and continues to have full confidence in its intellectual property protecting Nexium".

Having suffered the early fall, shares in Astra regained some of their lost ground in a gently rising market, to stand just over 2.3 per cent lower at 2,605p at lunchtime. The 62p price drop still values the group at more than £42.5 billion.

But, while a challenge to the Nexium patent does not come as a surprise - it is very similar to Astra's previous drug Prilosec, which is no longer patent-protected - this is the second time in less than four weeks that AstraZeneca has faced a potentially lengthy challenge to one of its patents.

Like others in its peer group, the big challenge facing AstraZeneca is that the patents have been expiring on many of its blockbuster drugs. It has been working hard to replace these with successful new medicines in order to counter any futures sales decline. It has also been battling to avoid losing sales to low-cost generic alternative treatments.

At the end of last month, Astra admitted that Teva Pharmaceuticals, an Israel based drugs firm was challenging its patent rights to Seroquel, another of its blockbuster drugs which notched up sales of $2 billion last year.

Teva also filed an abbreviated new drug application in the US as a challenge to Seroquel, giving Astra a similar 45-day period in which to file a legal claim against it. Astra maintained in this case as well, that it had "full confidence" in its ownership of the intellectual property rights to the drug.

Astra launched Nexium in 2001 to a sceptical market, which initially felt that it was too similar to Prilosec. As an off-patent drug Prilosec has to compete with generic over-the-counter alternatives. However, the group has been able to exploit some of the benefits of Nexium over Prilosec and will be keen to ensure that Ranbaxy is unsuccessful.

The Indian group is also challenging Pfizer over the patent to its anti-cholesterol drug Lipitor, the world's best-selling prescription medicine.

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