GlaxoSmithKline says it has lost an appeal in the US over patent rights for its Augmentin antibiotic.
The decision by a federal court in Washington DC to uphold earlier rulings means Glaxo's remaining American patents for the drug are now invalid.
The Anglo-American pharmaceuticals group has been battling for 19 months to stifle generic competition to Augmentin - once its second biggest product with sales of almost $1 billion in 2001.
A US court ruling in May last year that Glaxo's patents in the US were invalid paved the way for generic copies to come on the market sent and sparked a sharp drop in sales.
Geneva, a subsidiary of Novartis in Switzerland, led the way by launching its version of the drug across the Atlantic the following month.
It was followed by rival drugs groups Teva Pharmaceuticals of Israel and Ranbaxy of India, which won regulatory approval to market versions of the drug in the US.
Sales of Augmentin in the US slumped 40% following the initial ruling last year and Glaxo has continued to lose market share to competitors.
But the company told the London market it would remain in the market with Augmentin by focusing on its newer versions of the drug.
Company secretary Simon Bicknell said: "Glaxo continues to be committed to its newer Augmentin antibiotic medicines - Augmentin ES and XR - which now represent nearly 35% of the total number of prescriptions being written for branded and generic Augmentin."
Shares in Glaxo rose 8p to stand at 1376p following the news, which analysts said did not come as a surprise.