Ranbaxy in tie-up to source raw material for Diovan

If firm gets nod for generic version of Diovan from US FDA, it could grab 50% od $1.5 billion market

Drug maker Ranbaxy Laboratories is learnt to have partnered another multinational pharmaceuticals company for sourcing active pharmaceutical ingredients, or API, for the generic version of anti-hypertension drug Diovan. Sources said the company had already filed an application with the US regulator, seeking permission for the partnership.

A detailed email questionnaire sent to Ranbaxy on Monday did not elicit any response.

API is the main pharmaceutical ingredient to manufacture medicine formulations. While generic drug makers are required to file Abbreviated New Drug Applications with the US Food and Drug Administration to seek approvals for formulations, they also have to submit separate drug master file, providing details of the API used in those formulations.

Investors, as well as other Ranbaxy stakeholders, have been eyeing the launch of the Diovan generic by Ranbaxy for some time. This is because the management, despite the delay in seeking an approval from the regulator, has maintained it retained 180 days of exclusive marketing rights for the drug in the US. Though joining hands with another firm for sourcing API may help Ranbaxy get the long awaited permission for selling generic version of Diovan in the US along with securing exclusively rights for 180 days, it would also mean the company may have to share revenue or make a one-time payment to its partner.

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 for its generic version of the drug, with the subsequent 180 days of sole 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, according to analyst estimates.

According to sources, the company has already sought permission from the US Food and Drug Administration (US FDA) to shift manufacturing of the drug to its New Jersey-based Ohm Laboratories. The company’s all three Indian factories for manufacturing formulation – at Poanta Sahib (Himachal Pradesh), Dewas (Madhya Pradesh) and Mohali (Punjab) - are current barred from supplying medicines to the US. Recently, the company’s main API manufacturing factory at Toansa, around 150 km from Mohali, also received Form 483 from the US regulator, raising concerns in manufacturing practices at the plant that caters to around 70-75 per cent of the company’s API requirement.

Diovan generic is one of the key product approvals that the Street has been watching for a long time.  Initially, Ranbaxy was expected to secure approval for the generic drug in September 2012. In fact, after the company missed its first deadline, Mylan had also sued US FDA.  The Pennsylvania-based generic major 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.

While uncertainty continues to loom over possibility of Ranbaxy securing its exclusive marketing rights for Diovan generic, partnering with another firm may make things easier for the company struggling to correct manufacturing practices at its various factories.

In the past, Ranbaxy management has demonstrated its skill in monetizing various first-to-file opportunities such as launch of generic versions of Flomax, Zocor, Imitrex and Valtrex in the US.

On Wednesday, shares of Ranbaxy ended at Rs 419.85 on the Bombay Stock Exchange, down 2.32 per cent from the previous close.