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Biovail Corp. has taken a stake in the new generic version of heartburn blockbuster Prilosec as part of a $190-million (U.S.) acquisition of the closely held Pharma Pass group of companies.

Pharma, which has operations in California and France, invented and developed the only generic copy of Prilosec that did not infringe on patents held by drug giant AstraZeneca PLC.

Prilosec had sales of $5.7-billion for AstraZeneca last year, making it No. 3 in global sales after cholesterol pills Lipitor and Zocor.

Pharma's marketing partner Schwarz Pharma AG of Germany is shipping generic Prilosec in the United States and expects sales of $150-million this month.

It also predicted that it has the ability to meet up to 50 per cent of the market demand for Prilosec in the United States.

"The key to this deal is that Biovail will now capture the 5-per-cent to 10-per-cent royalty that Pharma Pass will receive on all of Schwarz's generic Prilosec sales," said UBS Warburg LLC analyst Steven Valiquette.

"This could be $40-million to $70-million annually," he predicted in a new report.

Pharma's principal owner is Pawan Seth, who specializes in improving how a drug's active ingredients are released. Biovail said it has collaborated with Dr. Seth in various research and development programs in the past.

Ken Howling, Biovail's vice-president of finance, said the deal reflected Dr. Seth's desire to "crystallize his financial gains now rather than in the future."

Biovail chairman and chief executive officer Eugene Melnyk said Pharma was attractive because of its novel drug delivery platform and two enhanced absorption formulations as well as "numerous product development programs targeting commercialization in 2005 to 2007."

Mississauga-based Biovail disclosed two of the programs, including new once-daily versions of the cholesterol drug Tricor and the depression treatment Effexor.

Pharma formulated the existing version of Tricor, which is sold by Abbott Laboratories of North Chicago, Ill., and is now generating annualized sales of $421-million.

A large part of the acquisition price reflects Pharma's product pipeline, which will prompt Biovail to take a one-time charge for research and development in the current quarter, the company said.

The amount of the charge has not been determined but some analysts suggested it could be as high as $120-million.

Shares of Biovail fell 44 cents to $32.51 on the New York Stock Exchange yesterday on volume of 2.2 million shares. It also slid on the Toronto Stock Exchange by $1.26 (Canadian) to $50.25.

Several analysts attributed the drop partly to delays in U.S. Food and Drug Administration approval of Biovail's new heart drug Cardizem LA.

Mr. Valiquette said he has removed his forecast of $30-million (U.S.) in fourth-quarter sales of Cardizem LA but is sticking with his profit estimate of 57 cents a share because of royalties from generic Prilosec.

...Fabrice Taylor. B17