Generic sales boost likely for Ranbaxy

The long-awaited US approval for Ranbaxy Laboratories' generic version of anti-hypertension drug Diovan is likely to come this week, according to industry sources.

While this could pull the company out of the red in the coming quarters, the development will also put to rest the uncertainties around Ranbaxy's claims of exclusive marketing rights for the drug.

The total US market for Diovan, a patented product of Novartis AG, is estimated at around $1.5 billion annually. If Ranbaxy gets the approval of the US Food and Drug Administration (FDA) for its generic version of the drug, with the subsequent 180-day exclusive marketing rights, it will be the only generic player, and is likely to capture around 50 per cent market share. During those six months, it could earn a revenue of $187 million (Rs 975 crore).

The expected approval would also boost investor sentiment on the Ranbaxy stock, as the Street had been watching for the nod on the Diovan generic for a long time. When asked, Ranbaxy declined to comment on the matter.

Initially, Ranbaxy was expected to secure approval for the Diovan generic in September last year. In fact, after the company missed its first deadline, Mylan had also sued FDA. The Pennsylvania-based company claimed Ranbaxy forfeited its right to the six-month exclusivity to sell the generic drug by not winning the US regulator's approval. However, a US district court ruled in favour of Ranbaxy, on the grounds that the delay in approval was caused due to a change in approval requirements.

On Friday, the shares of Ranbaxy closed at Rs 431.80 on the Bombay Stock Exchange, down two per cent from their previous close.

Besides Diovan, Ranbaxy is expected to get a similar approval, with sole marketing rights for 180 days, for a generic version of Roche's Valcyte during 2013. Analysts are hopeful that helped by a strong first-to-file pipeline, the company will start a new innings this year.

"Products such as Diovan, Valcyte and some authorised generics, mostly from the portfolio of parent Daiichi Sankyo, will contribute significantly to earnings this year," a source said.

Ranbaxy has forecast sales of Rs 12,000 crore for 2013. Elara Capital says if one assumes eight per cent growth in sales, excluding the US, and $100 million per quarter in US core generics, Ranbaxy's forecast implies $500 million of sales from products that come along with exclusive marketing rights.

Para-IV or sales from such drugs with exclusive marketing opportunities contributed around 27 per cent, at $615 million, of Ranbaxy's total revenue during 2012. While sales from the Lipitor generic contributed the most of this, authorised generics such as Actos, Caduet and Evoxac also did so.

Authorised generic drugs are essentially brand-name drugs but packaged and sold as generics by an innovator drug company, through either the innovator's generic subsidiary or an independent generic drug company. Over the past couple of years, Ranbaxy has been launching a number of authorised generics, mainly from the kitty of its Japanese innovator parent.