Monday, April 8, 2013

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.

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.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
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