Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 Edition) on picking money-making stocks.
This is an entirely free service. No payments are to be made.Ranbaxy has been in the limelight recently after a US court termed the US FDA’s decision ‘unlawful’, opening the door for the lucrative 180-day exclusivity period for ‘Simvastatin’. In this article, we shall take a look at two of Ranbaxy’s first-to-file (FTF) opportunities and the likely impact on revenues, should these opportunities materialise.
Generic drug | Brand name | Indication | Innovator | Sales (US$ m) | Other challengers |
Pravastatin | Pravachol | Cholesterol | BMS | 1,800 | Teva, Apotex and Genpharm |
Simvastatin | Zocor | Cholesterol | Merck | 5,000 | Teva/Ivax |
Atorvastatin | Lipitor | Cholesterol | Pfizer | 10,000 | None |
Esomeprazole | Nexium | Anti-ulcer | AstraZeneca | 4,633 | None |
Fenofibrate | Tricor | Cholesterol | Abbott | 1,020 | Teva, Par and Cipher |
Valacyclovir | Valtrex | Herpes | GSK | 1,040 | None |
Pioglitazone | Actos | Anti-diabetes | Takeda | Alpharma, Mylan, Teva and Watson | |
Tamsulosin | Flomax | Urology | Boehringer | 773 | None |
Pravastatin (Pravachol)
Pravastatin is a blockbuster drug (US$ 1.8 bn in revenues) belonging to the billion dollar statin class (for reducing cholesterol). This drug belongs to the innovator, BMS. It must be noted that the drug went off patent on April 20, 2006 with Teva receiving the 180-day exclusivity on 10 mg, 20 mg, and 40 mg strengths. Ranbaxy is gunning for the 180-day window on 80 mg dosage form and is currently awaiting US FDA approval for the same. The market size of the 80 mg strength is US$ 220 m. In the event that it is granted the 180-day exclusivity and assuming 50% price erosion and a 35% market share, the drug will contribute around US$ 19 m (Rs 836 m) to Ranbaxy’s topline in CY06. Post the exclusivity period, prices will erode at a much faster clip as more players enter the fray.
Simvastatin (Zocor)
Simvastatin is a US$ 5.0 bn dollar a year drug, belonging to Merck and is scheduled to go off patent in June 2006. While Ivax (acquired by Teva) had the FTF claim on the 5, 10, 20 and 40 mg strengths, Ranbaxy has a FTF claim on the 80 mg strength (US$ 500 m in revenues). Teva and Ranbaxy had, however, not challenged the main patent and as a result, were entitled to the 180-day exclusivity after patent expiry of the main compound. With Merck later de-listing the challenged patents, the US FDA refused to grant exclusivity on the same. In recent developments, a US court termed the US FDA’s decision as ‘unlawful’, which means that Teva and Ranbaxy can hope to secure exclusivity on this drug. That said, the US FDA has still to come with a final decision on the issue. It may further be recalled, that Merck had entered into a 180-day exclusivity deal with Dr.Reddy’s for the drug.
Generally, authorised generics tend to garner a higher market share as compared to the challenging company as they have the backing of the innovator. From Ranbaxy’s perspective, in the event of the 180 day exclusivity being granted, and assuming a 50% price erosion and a 35% market share, the drug will contribute around US$ 43 m (Rs 1.8 bn) to Ranbaxy’s topline in CY06.
FTF opportunities in a nutshell
Ranbaxy’s total cumulative ANDAs now stand at 170, with 111 product approvals and the remaining 59 pending approvals. This makes Ranbaxy’s product pipeline the second largest in the US generics market (after Teva), indicating the potential in the long-term. Out of these, 18 are potential ‘first-to-file’ opportunities (FTFs) representing a market size worth US$ 22.2 bn. It must be noted that out of these 18 FTFs, currently 6 are under litigation (including the ‘Lipitor’ suit, which Ranbaxy has lost). The remaining 12 molecules on which Ranbaxy has not been sued represent a market of around US$ 9.7 bn in innovator sales. However, these opportunities, if approved by the US FDA, will unravel over a period of three to five years.
| |