Authorised clones may hit Ranbaxy’s FTF bet

The proverb “all that glitters is not gold” seems apt for Ranbaxy Laboratories amid a flurry of patent expiries that are slated in the US market.

Even as the pharmaceutical market in India is gung-ho about the multi-billion dollar patent expiries scheduled from this year, the presence of authorised generics (AGs) can dent their opportunities.

When blockbuster drugs are set to lose patent protection, their makers look for ways to defend their sales by appointing a generic firm to manufacture generics of the same products to protect revenues. These generics are called AGs.

And Ranbaxy would be the most impacted by the presence of an AG, as it has the FTF, or first-to-file, status on quite a few drugs in the US market, giving it a period of exclusivity for six months, but will have to share that period with AGs.

Whether or not the decision of the US Food & Drug Administration (USFDA), on the case filed by US-based Mylan Inc against granting of approval to Ranbaxy’s generic version of top-selling drug Lipitor, goes in its favour, the Gurgaon-based company will have to confront an AG in the period it was supposed to make maximum money.

US-based Watson Pharma and Israeli generic major Teva hold the AG licence for Lipitor and Actos respectively, two drugs for which Ranbaxy holds the FTF on account of it being the first firm to successfully challenge the patent.

Cholesterol drug Lipitor, developed by Pfizer, had sales of $7 .27 billion in the US in 2010 and the patent on it expires in November.

While sales of the diabetes drug Actos, developed by innovator Takeda, were $3 billion, and its patent expiry is due in August 2012.

“The presence of an AG (firm) during the exclusivity period would mean lower market share for the firm which holds the FTF. A firm like Ranbaxy could have garnered as much as 60% share in that six month period if there was no AG. But now, the maximum it can get is 40% share which also looks a very remote possibility,” said an industry expert with a brokerage firm.

A Ranbaxy spokesperson said the company does not want to comment on any product or revenues.

On products like Lipitor and Actos, Ranbaxy could have made $400-600 million during the six month period, but now because of the AG, the company will have to be content with sales of less than $200 million, say analysts.

Sujay Shetty, associate director, PricewaterhouseCoopers, said that with AG, the price erosion is more. “The advantage of the six month period is that the FTF holder should be able to make as much money as possible in that period before the market opens up to all and sundry. But an AG means the FTF holder has to share space with another player.”

A recent study conducted by a US advisory group named The Impact of Authorised Generic Pharmaceuticals on the Introduction of Other Generic Pharmaceuticals notes that generics launched in the absence of AG produced 4.6% higher margins than generics launched with competition from an AG.