Ranbaxy launches Lipitor generic

A last-minute marketing approval from the United States medicine regulator, Food and Drugs Administration (FDA), and a profit-sharing agreement with Israel’s Teva have helped Ranbaxy launch the generic version of Pfizer’s biggest revenue-earning drug, Lipitor, without delay.

The drug had clocked $7.89 billion in the US through September. While the development has put an end to the uncertainty surrounding Ranbaxy’s ability to launch the drug on time, it has raised questions over earnings from the deal, due to the profit-sharing agreement with Teva.

Ranbaxy received FDA approval for the low-cost version of the cholesterol-lowering drug (atorvastatin calcium tablets) on November 30, the day Lipitor’s patent protection expired in the US. It has not disclosed details of the agreement with Teva.

 

Ranjit Kapadia of Centrum Broking finds the Teva deal an indication of Ranbaxy’s inability to solve its three-year regulatory tussle with the FDA over quality complaints against its two Indian manufacturing facilities.

“The active pharmaceutical ingredients (raw materials) for Lipitor generic was originally planned to be produced from Ranbaxy’s Indian facility. With that facility under FDA scanner, the company must have roped in Teva for supply of raw materials,” he said.

However, not all are skeptical. “Overall, it’s a positive development. It has ended a lot of confusion relating to FDA approval,” said Sarabjit Kaur, vice-president, Angel Broking.

MARKETING RIGHTS
Ranbaxy has a six-month exclusive marketing right over the generic version of Lipitor, as it was the first company to successfully challenge Pfizer’s patent on the product. However, the company may not be able to meet the initial industry estimates of $500 million to $600 million from six months’ sale of the generic due to stiff competition from Watson, the US company that is marketing Lipitor’s “authorised generic”, the low-cost version produced by Pfizer and supplied to Watson on a profit-sharing agreement.

In addition, Pfizer has reduced the price of Lipitor and launched several patient-friendly schemes to retain its customer base.

PINC Research estimates these developments to result in 40 per cent price erosion for Ranbaxy. “We now expect Lipitor to contribute $486 million to the revenues and Rs 25 per share during the exclusivity period,” said Sushant Dalmia, PINC analyst.

The profit from Ranbaxy drug is also likely to be below the initial estimates as production cost in the US is much higher than shipping it from India. The FDA has allowed Ranbaxy to produce generic Lipitor from its US manufacturing facility Om Laboratories in New Brunswick, New Jersey. Further, it has to share the profits, which analysts estimate to be as high as 25 per cent, with Teva.

“We estimate Teva to share, at least, 15-20 per cent ($72-97 million) of the profits earned from generic Lipitor during the exclusivity period,” said Dalmia.