Bayer To Slice Ciprofloxacin Royalty Paid To Ranbaxy

Bayer AG of Germany will marginally reduce the royalties paid to Ranbaxy Laboratories for its once-a-day formulation of anti-anthrax drug, ciprofloxacin, Reuters reported today quoting a source close to the development.

Ranbaxy had licensed the drug to Bayer for the whole world, except India and China. In return, Bayer was to give it milestone payments of around $65 million and royalties worth $30 million.

Ranbaxy has received $15 million in upfront and milestone payments so far. Reuters quoted the source as saying that the rest of the milestone payments would be made in 2002.

In July 2001, it had become known that Bayer was developing a product competing with Ranbaxy's ciprofloxacin once-a-day. This was confirmed by Ranbaxy, which had said that Bayer was contractually obliged to launch the Ranbaxy product. Subsequently, there was speculation that the royalties to Ranbaxy would be cut sharply.

Now, it seems, the cuts will only be marginal, and Ranbaxy will be assured of a degree of certainty in the royalty payments and, hence, a steady flow of revenues. "This is good news for the company," a source said.

The markets reacted positively, with the Ranbaxy scrip moving up by 2.3 per cent to close at Rs 752.35 on the Bombay Stock Exchange, even as the Sensex went down by 0.09 per cent. "There is widespread relief in the market that Ranbaxy will get an assured stream of payments," said a dealer with a domestic brokerage.

Ranbaxy has been able to cut a good deal with Bayer as the German drug major is likely to combine Ranbaxy's technology with its own, Reuters said. Analysts expect Bayer, the original developer of ciprofloxacin, to begin selling the once-a-day formulation before its patent on a twice-a-day form expires in 2003.

Ranbaxy today also announced that its wholly owned subsidiary in the US -- Ranbaxy Pharmaceuticals Inc -- has received US FDA approval for acetamenophin and codeine phosphate tablets USP 300 mg/30 mg and 300 mg/60 mg. The combine provides relief in mild to moderately severe pain. The products will be launched immediately in the US market.