Zydus faces stiff competition for blockbuster drug in US from Teva Pharma

Ahmedabad-based pharma major Cadila Healthcare's blockbuster generic drug for treating ulcerative colitis is in for stiff competition from Israeli drug major Teva Pharmaceutical Industries.

Teva launched the generic version of Irish firm Shire’s Lialda in the US earlier this week.

Analysts expect the margins of the drug to shrink as competition rises in the US market.  Apart from Teva, Mylan and Amneal are the other probable filers and are expected to launch their products in 2018-19. 

Deepak Malik, analyst with Edelweiss Securities, said: “Once competing products start coming into the market, the drug largely loses its attractiveness and becomes like any other generic drug in the US market.” 

The drug, a generic of mesalamine, is estimated to have a market size of $1.5 billion and Cadila Healthcare (also known as Zydus Cadila) was the first to file (FTF) an abbreviated new drug application (ANDA) for a generic version of Lialda in the US.

Zydus had launched its generic version of Lialda from its Moraiya facility near Ahmedabad around mid-July last year and this drug has contributed to the company's US growth story this fiscal. 

In the second quarter of the financial year, it saw its US revenues soar 66 per cent riding on the generic of Lialda, which enjoyed a 180-day exclusivity period. During the third quarter, the company's US business continued its dream run, banking on the generic and influenza drug Tamiflu, and grew 78 per cent year on year. 

The generic has been the big launch for Cadila this financial year. Analysts expect around 40 per cent of the 2017-18 profits to come from the drug. However, as competition for the drug increases in the US, analysts point out that the generic is expected to contribute less than 20 per cent of the company's profits in 2018-19. 

Cadila's 180-day exclusivity period ended in January. Teva's version of Lialda was expected to be launched in the same month. Its approval, however, was delayed. As a result, Zydus Cadila enjoyed a clear run for an additional 75 days after the 180-day exclusivity period.

The market is abuzz that innovator company Shire Plc too is gearing up to launch an authorised generic (AG) version of the drug in the US market soon. In 2016 this product had reported annual sales of $714 million.

Cadila's US business, however, is expected to be driven by other mesalamine drugs in 2018-19. Not many companies have a pipeline of mesalamine molecules. Zydus has Asacol HD and other niche category transdermal products, which would drive the company's US revenues in 2018-19.

A senior executive of Cadila Healthcare had told Business Standard that the price erosion of the base business in the US was bottoming out and in the third quarter of 2017-18 it was at 4 per cent. 

“The fourth quarter would see 10-12 product launches in the US and this would continue for the upcoming quarters. On the whole, we expect, the share of the US to rise in our overall revenue — from roughly 50 per cent now to 55 per cent in 2018-19 and the US would contribute around 60 per cent of our revenues by 2019-20,” he said.