Cipla has finally announced a deal to supply the anti–ulcer bulk drug omeprazole to Andrx Corporation of USA. This is a positive development for the company and one could see the stock rise from current levels.
It would be recalled that ‘Prisolec’ (Astra Zeneca’s $ 4.1 bn anti–ulcer blockbuster) is going of patent in October 2001. Andryx is the only company with a tentative approval to market the anti–ulcer drug in the USA and enjoys a six month period of exclusivity post October 2001. Cipla’s tie–up with the former for the exports of the bulk drug could give the company a good growth in exports over the next few years.
Meanwhile, Astra Zeneca has itself developed ‘Nexium’ which it claims a siginificant improvement over its ‘Prilosec’. Initial reports mention that ‘Nexium’ has advantage over ‘Prilosec’ only in severe conditions. The last word, on whether Astra Zeneca can convince regulatory authorities has still not been said.
If however, Andryx were to succeed in its quest for exclusivity, the tentative market size could be in the range of US $ 410 m (Rs 18 bn) even assuming that the prices fall 90% after the period of exclusivity.
At the Annual General Meeting held in the first week of September, Mr. Amar Lulla, the Executive Director of the company was unwilling to talk about the prospects of omeprazole exports to the USA but he did mention that the company was banking on the generic market in the USA for delivering major growth in the future. The company expects an export turnover of Rs 1.8 bn in the current year, which amounts to almost 20% of the company’s turnover. This is likely to increase to 40% over the next 5 years led partially by the present deal.
Interestingly, the company’s own version of omeprazole is undergoing trials in New Zealand and this could lead the company to compete with Andryx in the future.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407