Indian pharma: A walk through 'Para IVs' - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Indian pharma: A walk through 'Para IVs'

Sep 21, 2012

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

PIRAMAL ENTERPRISES Surges by 6%; BSE HEALTHCARE Index Up 0.7% (Market Updates)

Jun 2, 2020 | Updated on Jun 2, 2020

PIRAMAL ENTERPRISES share price has surged by 6% and its current market price is Rs 1,194. The BSE HEALTHCARE is up by 0.7%. The top gainers in the BSE HEALTHCARE Index are PIRAMAL ENTERPRISES (up 5.5%) and ALKEM LABORATORIES (up 5.2%). The top losers are ALEMBIC PHARMA (down 0.1%) and NARAYANA HRUDAYALAYA LTD (down 0.3%).

ASTER DM HEALTHCARE LTD Surges by 6%; BSE HEALTHCARE Index Up 0.9% (Market Updates)

Jun 2, 2020 | Updated on Jun 2, 2020

ASTER DM HEALTHCARE LTD share price has surged by 6% and its current market price is Rs 98. The BSE HEALTHCARE is up by 0.9%. The top gainers in the BSE HEALTHCARE Index are ASTER DM HEALTHCARE LTD (up 6.3%) and ALKEM LABORATORIES (up 5.4%). The top losers are AJANTA PHARMA (down 0.1%) and DR. LAL PATHLABS LTD (down 0.1%).

STRIDES PHARMA SCIENCE Surges by 5%; BSE HEALTHCARE Index Up 1.4% (Market Updates)

Jun 2, 2020 | Updated on Jun 2, 2020

STRIDES PHARMA SCIENCE share price has surged by 5% and its current market price is Rs 421. The BSE HEALTHCARE is up by 1.4%. The top gainers in the BSE HEALTHCARE Index are STRIDES PHARMA SCIENCE (up 5.1%) and GLENMARK PHARMA (up 5.3%). The top losers are GSK PHARMA (down 0.3%) and FORTIS HEALTHCARE (down 0.3%).

J.B.CHEMICALS at All Time High; BSE HEALTHCARE Index Up 1.4% (Market Updates)

Jun 2, 2020 | Updated on Jun 2, 2020

J.B.CHEMICALS share price has hit an all time high at Rs 734 (up 1.1%). The BSE HEALTHCARE Index is up by 1.4%. Among the top gainers in the BSE HEALTHCARE Index today are J.B.CHEMICALS (up 1.1%) and ABBOTT INDIA (up 0.6%). The top losers include APOLLO HOSPITALS (down 0.1%) and GSK PHARMA (down 0.4%).

J.B.CHEMICALS at All Time High; BSE HEALTHCARE Index Up 1.2% (Market Updates)

Jun 2, 2020 | Updated on Jun 2, 2020

J.B.CHEMICALS share price has hit an all time high at Rs 734 (up 4.8%). The BSE HEALTHCARE Index is up by 1.2%. Among the top gainers in the BSE HEALTHCARE Index today are J.B.CHEMICALS (up 4.8%) and ABBOTT INDIA (up 0.6%). The top losers include DR. REDDYS LAB and SANOFI INDIA .

More Views on News

Most Popular

6 Charts Showing the State of Indian Financial Markets in 2020 (Sector Info)

May 26, 2020

Six charts showing how Indian financial markets have performed in 2020 so far...

What the RBI's Rate Cut Means for Options Traders (Fast Profits Daily)

May 25, 2020

The RBI governor has cut the repo rate to 4%. What does this mean for options traders? Find out in this video.

Which Stocks Should You Buy, Sell, and Hold in the Market Today? (Profit Hunter)

May 21, 2020

The coronavirus led uncertainty refuses to go away from the markets. Here's what retail investors should do with their stocks...

Why We Picked This Smallcap Stock for a Post Coronavirus World (Profit Hunter)

May 28, 2020

Covid-19 has made it a survival of the fittest race for many companies. The ones that can adapt will thrive in a post crisis world.

More

India's #1 Trader
Reveals His Secrets

The Secret to Increasing Your Trading Profits Today
Get this Special Report, The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE HEALTHCARE


Jun 2, 2020 (Close)

S&P BSE HEALTHCARE 5-YR ANALYSIS

COMPARE COMPANY

MARKET STATS