Bayer has suffered a major blow with the news that a US court has ruled that the patent on the firm’s blockbuster oral contraceptive Yasmin is invalid, leaving the way open for Barr Pharmaceuticals to sell its generic version of the drug.

The ruling, by Judge Peter Sheridan for the District of New Jersey, stated that the 531 patent at issue was invalid because it was obvious. This decision could signal the end of a legal battle that began when Barr filed its Abbreviated New Drug application containing a paragraph IV certification for a copycat version of Yasmin (drospirenone and ethinyl estradiol) with the US Food and Drug Administration in January 2005.

Barr’s ANDA was met by a patent infringement lawsuit in April of the same year filed by Schering AG (which was acquired by Bayer in June 2006) and its US subsidiary Berlex. The ruling was certainly feared by Bayer which is facing up to generic competition for the hypertension treatment Adalat (nifedipine) and the antibiotic Cipro/Ciprobay (ciprofloxacin) and at last week’s spring press conference in Leverkusen, chairman Werner Wenning said that Yasmin was the most important patent case the firm was dealing with.

Bayer responded by saying that it disagrees with the court’s decision “and will consider its legal options in this regard. The company will continue to vigorously defend its intellectual property”. The firm added that it is “currently evaluating the impact of the court’s decision” on another product of the company’s line of oral contraceptives, YAZ which was launched in the USA in 2006. The Germany-based group said that regardless of the judge’s decision on Yasmin, Bayer retains marketing exclusivity for YAZ in the USA until March 16, 2009.

The company concluded by saying that it has plans to improve the earnings before interest, taxes, depreciation and amortisation margin before special items of Bayer HealthCare to 27% in 2008, from 25.6% in 2007. The margin target for 2009 remains unchanged at around 28%.

Barr was unsurprisingly buoyant about Judge Sheridan’s ruling and chief executive Bruce Downey said that “clearly, this is a positive development for the company and we are evaluating what the potential impact could be on our earnings guidance for 2008”. Yasmin sales in the USA reached 321 million euros last year.

The news has dismayed investors in Bayer and the firm’s share price at 9.15 this morning was down over 4.3% to 48.02 euros.