The Indian patents office in 2007 refused patent protection to AstraZeneca's quinazoline molecule, citing lack of invention. The Intellectual Property Appellate Board (IPAB) on Monday upheld the refusal.

The decision is also a setback for struggling AstraZeneca, which is battling to turn itself around as key drugs lose patent protection.

Global drug companies suffered a high-profile reversal in March when India granted the first ever compulsory license to domestic drugmaker Natco Pharma to sell cheap copies of Bayer's cancer drug Nexavar. Bayer has appealed the order.

And early this month IPAB revoked a six-year-old Indian patent granted to Roche's hepatitis C drug Pegasys, citing lack of evidence that the drug was any better than existing treatments.

Multinational drug manufacturers regard India's $13 billion drug market as a huge opportunity, but are wary of what they see as lax protection for intellectual property in a country where generic medicines account for more than 90 percent of sales.

Indian generic companies, which do not need to plough money into future research, can produce drugs at a fraction of the cost of originator firms like Roche or Bayer.

Natco and another domestic drugmaker, G. M. Pharma, had opposed the initial patent application for AstraZeneca quinazoline derivative. The London-listed company filed a review petition, which India's patent office dismissed in 2011.

A challenge to a review petition does not come under the purview of the IPAB, and even on merit the petition has failed, S. Majumdar & Co, the counsel for Natco Pharma, said in a statement.

AstraZeneca could not immediately be reached for a comment by Reuters. The company has the option to take its case to India's Supreme Court.

(Reporting by Kaustubh Kulkarni in MUMBAI; Editing by Muralikumar Anantharaman)

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