UPDATE 2-U.S. ruling knocks Labopharm, Biovail shares lower

* Ruling paves way for new competition for once-daily drug

* Analyst sees $10 mln-$15 mln Biovail revenue hit in '09

* Biovail shares down 1.7 pct; Labopharm falls 11.7 pct (In U.S. dollars unless noted)

TORONTO, Aug 17 (Reuters) - Shares of Canadian drugmakers Biovail Corp BVF.TO and Labopharm Inc DDS.TO dropped on Monday after a U.S. court ruling that will lead to more competition for a popular painkiller, variations of which are produced by the two companies.

Labopharm shares fell 11.7 percent to C$1.73, while Biovail shares were down 1.7 percent at C$14.98 on the Toronto Stock Exchange.

Late last week a court in Delaware ruled in favor of U.S.-based generic drugmaker Par Pharmaceuticals Inc in a patent-infringement case against Purdue Pharma related to tramadol hydrochloride extended-release painkiller tablets.

Purdue is patent holder of the drug in question in the case.

Biovail sells a generic version of the drug under the name Ultram ER, while Labopharm manufactures its own once-daily tramadol product Ryzolt, which is marketed in the United States by Purdue.

The court's decision, coupled with tentative U.S. approval for Par's version of the drug, bring Par close to launching its own generic product, which will cut into Biovail and Labopharm's market.

Paradigm Capital analyst Claude Camire estimates the ruling could cut Biovail's revenue by $10 million to $15 million in 2009, and $20 million to $30 million in 2010.

Biovail's revenue for Ultram was $81.9 million in 2008 out of total revenue of $757.2 million. In the first half of 2009, it accounted for $37.2 million of a total $366.9 million.

"They will be impacted because there will be one more competitor in that sector," Camire said. "There will be one more choice. But we don't know what the timing will be."

Labopharm, a small Quebec-based company launched its own version of the painkiller, a once-daily tramadol, in the United States earlier this year in partnership with Purdue.

Dundee Capital Markets analyst David Martin lowered his rating on Labopharm to "speculative buy" from "buy" and reduced his stock price target to C$1.45 from C$2.30 on the judge's decision.

"We believe it is prudent at this time to heavily discount the potential value of the U.S. tramadol opportunity. Friday's court decision may clear the path to market for other once-daily tramadol products," Martin wrote in a note.

Purdue still must decide whether to appeal the decision. ($1=$1.11 Canadian) (Reporting by Scott Anderson; editing by Peter Galloway)