X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Indian pharma: A walk through 'Para IVs' - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 21, 2012

    Indian pharma: A walk through 'Para IVs'

    We keep reading about the various patent challenges being filed in US, against various global generic pharma companies. This includes many Indian names as well. These patent challenges are referred to as 'Para IV' filing. When a generic company intends to sell innovator's drug before its patent expiry, it files an additional document called Para IV with USFDA to get the approval.

    Historically, only large cap companies like Ranbaxy, Lupin, Dr Reddy's, Sun Pharma filed Para IVs. But now the list of the companies participating in Para IVs has expanded. Companies like Alembic Pharma, Aurobindo, Claris lifescience, Torrent Pharma etc have also started filing Para IVs since last couple of years.

    Indian Companies Participation in Para IVs

    Indian companies are present in atleast 50% of Para IV litigations going in US. The table below gives an overview of the Indian Pharma biggies, and their revenues from Para IVs in US during FY12/CY11. As per the table below, the highest revenues from launch of a Para IV, was generated by Ranbaxy. The company had launched one product viz Lipitor in November 2011.

    Table 1: US Revenue Profile of Indian Top 5 Pharma companies
    Company (Rs mn) Total Revenes FY 12 US Revenues FY12 % Revenue from Para IVs FY12
    Ranbaxy 101,815 36,000 56%
    Dr Reddys 95,194 29,927 20%
    Lupin 71,250 25,303 4%
    Sun Pharma 80,057 34,367 0%
    Source: Company Reports


    Going forward, as we are approaching the patent cliff, Indian companies have developed a Para IV pipeline in order to be part of the large expiring product basket. For example, Lupin has highest number of Para IV pipeline of around 90 products, addressing market size of US$ 30 bn. Other pharma companies viz; Sun Pharma and Dr Reddy have pipeline of around 35 products each. Followed by, Wockhardt and Cadila at 10 & 9 respectively. Further, Ranbaxy has a Para IV pipeline of 7 products; however the size of these 7 products is US$ 8 bn. This implies various companies have different criteria and focus while filing a Para IV.

    Why a Para IV is filed?

    The US government enacted, Hatch-Waxman act (Drug Price Competition and Patent Restoration Act). This was enacted to encourage generic companies to launch their generics in US, before the patent expiry, by challenging the innovator's patents. In return the first generic filer (FTF) gets awarded with 180-days of exclusive launch of the drug, if it prevails the litigation challenge.

    First to File (FTF) benefit

    A company, who holds FTF, is able to enter first in the market gets an advantage of higher market share and higher margins. Also, after 180-days the company is able to govern better market share than the new entrants.

    For example: Ranbaxy was first to enter the US market with generic version of Lipitor and was able to gain 40%+ market share during 180-days exclusivity. Post exclusivity other 4-5 generic companies entered the market, yet Ranbaxy was able to maintain its market share in the range of 35%-40%.

    Thus, through Para IV, companies not only intend to enter early and generate higher revenues during low competition, but also look for retaining the market share when the other generic companies enter the market.

    How do the late Para IV filers benefit?

    In most of the cases, many Para IVs are filed, though the generic company is aware that, it is not a FTF. The company is than looking to enter the market under low competition, which it normally does by entering into "settlement" with the innovator. Through settlements, both the companies mutually decide to end the litigation. In return the innovator gives the right to generic company to launch its generic after a specific time frame.

    For example: Around 4-5 companies were able to launch Lipitor generics (Lipitor still has unexpired patents) post expiry of 180-days exclusivity, this was because of the settlement done by generic companies with the innovator. Settlement helps to end the litigation and in turn also helps the innovator and generic company to mitigate the litigation cost.

    What if the litigation was not settled?

    In that case the generic companies can launch the product if it is having drug approval from USFDA, but then that launch will become "launch at risk". This is because the innovator's patents are yet to expire and outcome of the litigation is pending and yet the generic company makes the launch.

    Generally companies avoid landing up in a situation of "launch at risk". This is because if the innovator wins the litigation then the generic company is entitled to make the penalty payment as per the court orders, which could be even more than what company had earned from the launch of the said product.

    Conclusion

    The companies which have healthy Para IV pipeline will be the ones to sustain the competition in US. Thus Indian pharma companies, targeting qualitative Para IVs will be of best fit for an investor.

     

     

    Equitymaster requests your view! Post a comment on "Indian pharma: A walk through 'Para IVs'". Click here!

      
     

    More Views on News

    Sun Pharma: Bottomline Slips into the Red Amidst Challenging Environment (Quarterly Results Update - Detailed)

    Aug 14, 2017

    A challenging environment and one-time expense pushes Sun Pharma into a loss in the first quarter.

    Lupin: Bigger Challenges or Bigger Margin of Safety? (Quarterly Results Update - Detailed)

    Aug 14, 2017

    GST impact coupled with price erosion in US leads to lower profits for the quarter.

    Dr Reddy's: US Pressure Continues to Haunt (Quarterly Results Update - Detailed)

    Aug 8, 2017

    Profits plunge due to higher raw material costs.

    The Power of 5 Minutes (The 5 Minute Wrapup)

    Jun 16, 2017

    Here's what you can expect from The 5 Minute Wrapup in the coming months and years.

    Biocon: Lower Licensing Income Leads to Muted Growth for the Quarter (Quarterly Results Update - Detailed)

    Jun 23, 2017

    Net Profit lower due to exceptional items in the previous year.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    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: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE HEALTHCARE


    Aug 23, 2017 (Close)

    S&P BSE HEALTHCARE 5-YR ANALYSIS

    COMPARE COMPANY

    MARKET STATS