India's Most Influential Business and Economy Magazine - A Planman Media Initiative 
 Search  
  Other Sections
  
  • Home
  
  •  Cover Story
  •  B&E This Fortnight
  •  B&E Indicators
  • BE Corporation
  • Finance
  • International Column
  • National Story
  • Policy
  • Scrutiny
  • Sector
  • Snapshot
  • Testimonial
 


Share |
BE Corporation
 
Go to Page Number - 1   2   
RANBAXY: GENERICS MARKET AND THE USFDA ISSUE
Ranbaxy’s cookie – will it crumble?
Much of Ranbaxy’s fortunes is riding on the way its impasse with the USFDA over Lipitor generic sales pans out. The timely resolution of the dispute can make a big difference for India’s largest drugmaker – between making a fortune and being content with making a living. Caution: November is fast-approaching.
Issue Date - 13/10/2011
 
The feelings run both ways. Indian generic drugmakers exporting to US are salivating over a goldmine of opportunity worth $96 billion that is expected to come their way from drugs going off-patent between 2011 and 2013. Also, governments the world over – US, Europe and Japan, as also fast-growing markets such as Brazil, Russia, India, China, Turkey, Mexico and South Korea – are pushing for cheaper, generic drug equivalents. But the bumper bonanza in generics may still slip from the grasp of Indian pharma companies because of quality concerns and the underlying fear of possible litigation. Not a pleasant sight.

Indian drug firms, which account for about a third of US applications for approval to sell generics, could add $2 billion to $2.5 billion to their US market sales over the next five years, doubling their revenue from the country, according to Morgan Stanley. Though the outlook for Indian companies looks good due to continued demand for generic drugs – or chemically similar versions of original medicines – ratings agency Fitch singles out regulatory concerns and litigation as a key risk. The US Food and Drug Administration (USFDA) has in recent times raised regulatory concerns and quality issues of varying degrees of seriousness with regard to a host of Indian companies, be it Ranbaxy, Claris, Sun Pharma or Lupin. With Ranbaxy, for instance, which stands to gain the maximum from original drugs going off-patent thanks to its licence to sell the generic version of Lipitor – Atorvastatin in the US market, quality issues have dogged the company from late 2008, just after it was acquired by Japanese drug major Daiichi Sankyo in a $4.6-billion deal earlier in the same year.

For Ranbaxy, the ghost of its regulatory problems with the USFDA still remains to be exorcised. India’s largest pharma company by sales (Rs.81.47 billion during FY2010) with operations in 46 countries has been facing a regulatory clampdown from the American drug regulatory body (USFDA) for about three years now, which has affected its prospects for launching products in the US market. This is how it started. In 2008, Ranbaxy had sealed an agreement with Lipitor’s original maker Pfizer and obtained from it a licence to sell a generic version of Lipitor in the US market from November 30, 2011. Due to its first-to-file status with the USFDA, Ranbaxy also got the exclusivity right on the drug for 180 days before other manufacturers can introduce their versions of the drug in the US market. But late that year, a bomb fell on Ranbaxy. The USFDA imposed a ban on import of the company’s 30 generic drugs, after two of the company’s manufacturing facilities in Dewas and Paonta Sahib failed on quality parameters. This run-in with the USFDA has led to a delay in the approval of the drug copy of Lipitor, a blockbuster drug for lowering cholesterol.

With clouds of doubts hanging heavily on Ranbaxy’s Lipitor gambit, investors are getting edgy and the company’s earnings have fallen in recent times. In the second quarter ended June this year, Ranbaxy posted a 25% drop in quarterly profit, hurt by slowing overseas sales and rising costs. In Europe, the company’s growth has been sluggish given the pricing pressure in most countries of the continent.

 
But in the domestic market, which contributes 20-25% of the global business of Ranbaxy, Project Viraat, which the company rolled out last year with a view of establishing a leadership position in the next 2–3 years, is gaining momentum. Its OTC business in India with brands like Revital, Volini et al, is contributing strongly to total sales and the company plans to achieve 15–20% growth on the domestic front. According to ORG IMS, a pharmaceutical market research agency, Ranbaxy’s current market share is 4.9% (making it the #3 in terms of volumes) and through Viraat, it hopes to corner 6% of the generics market by 2012. By 2020, the India’s generic market is forecasted to grow to $30 billion from the current $8 billion. Ranbaxy is aiming for the top slot by 2014 (Abbott-Piramal, after its recent takeover of Piramal Healthcare’s domestic formulations business, is the current #1 in India, with a near 7% market share, followed by Cipla and Ranbaxy).

It is however the US market that can turn the fortunes for Ranbaxy. Generics are poised to increase their market dominance in the next few years in the US, driven by the wave of patent expirations, rising from 77% of prescriptions in the first half of 2010 to as much as 85% by 2014, according to a forecast by IMS Health Inc. Despite the uncertainty over Lipitor, US has been Ranbaxy’s biggest market, accounting for nearly a quarter of its revenues. But for Ranbaxy to grow its US business, launches of exclusive generic drugs, such as Lipitor, which have or are about to go off-patent, remain crucial. The launch of anti-viral drug Valtrex (Valacyclovir) generics on exclusivity at the end of 2009, had driven earnings during 2010. Its US sales at $660 million grew 66.2% y-o-y and overall group revenues at Rs.89.61 billion grew 18% y-o-y. However, the launch of Aricept generics at the end of 2010 on exclusivity could not bring in the desired results. US-based Greenstone launched another authorised generic version of Aricept, as a result of which Ranbaxy was able to garner lower market share leading to price erosion. Result: for the first two quarters of 2011, the US market did not prove too happy a hunting ground. Revenues during the first two quarters at $170 million and $112 million declined 35.4% and 13.7% y-o-y respectively. The net revenues too at Rs.21.81 billion and Rs.20.93 billion declined 19.2% and 2.7% respectively – all the more reason why the launch of Lipitor in end-November this year is being eagerly awaited, as it has the potential to dramatically rev-up Ranbaxy’s revenues from US.

          

Share |
 
Go to Page Number - 1   2        Next
 


      
Comments   
   
      
Leave your first comment

   


     Leave Comments to this story    
     
Name:  
Comments:  
Email id:  
City:  
 
 
Busines & Economy is also associated with :
©Copyright 2008, Planman Media Pvt. Ltd. An Arindam Chaudhuri Initiative. With Intellectual Support from IIPM & Malay Chaudhuri.