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India Equity Research Reports, IPO and Stock News
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● With the launch date of generic Lipitor approaching (30 Nov 2011),
we are receiving investor queries whether the Lipitor case can go like
the Flomax or Gemzar cases, implying if Ranbaxy cannot get the
approval, can it cut out a deal with the subsequent filers.
● The US FDA allows the first filer to waive its exclusivity in favour of
another specific generic applicant only once the exclusivity is
triggered. The two conditions which can trigger exclusivity are: (1)
commercial marketing and (2) a favourable court decision.
● In the Gemzar case, Teva could do site transfer, as its exclusivity
was triggered when Sun invalidated the patent. However, in case of
Lipitor, we see a low probability of ‘156 patent being invalidated, and
Pfizer has been settling with the subsequent filers so far.
● Flomax was a post-MMA filing and thus Ranbaxy could not park its
exclusivity and the patent was expiring two months post the
settlement date. The last option now, other than its own approval, is
to altogether give up the exclusivity and strike a deal with
subsequent filers. It is suboptimal, but Ranbaxy has bargaining
power, as it has the option to go to courts and challenge FDA’s
decision.
Lipitor monetisation options for Ranbaxy
With the launch date of generic Lipitor approaching (30 November
2011), we have been receiving investor queries whether Lipitor case
can go like the Flomax or Gemzar cases, implying if Ranbaxy cannot
get the approval of its own product, can it cut out a deal with the
subsequent filers.
● In the Flomax case, Ranbaxy relinquished its exclusivity and, as
part of its settlement agreement with Boehringer, received an
incentive and Impax was the only generic company during the
exclusivity period of March and April 2010.
● In the Gemzar case, Teva after having troubles with its own
manufacturing site, transferred manufacturing to APP and could
retain 180 days exclusivity.
What does Hatch Waxman Act say?
The US FDA allows the first filer to waive its 180 days exclusivity in
favour of another specific generic applicant but only once the
exclusivity is triggered. The two conditions which can trigger
exclusivity are (1) commercial marketing – first generic applicant
launches its product, and 2) a favourable court decision. The law
allows Ranbaxy to waive its exclusivity rights entirely at any time, thus
allowing the FDA to approve all otherwise eligible ANDAs.
How is Lipitor case different from Flomax and Gemzar?
In the Gemzar case, Teva could do site transfer, as its exclusivity was
triggered when Sun pharma invalidated the patent. As per the law
described above, Teva’s exclusivity was triggered.
In Ranbaxy’s case, we see a low probability of subsequent ANDA
filers proving invalidity or non-infringement of ‘156 patent, and
additionally Pfizer has opted for settlement with the subsequent filers
so far. Therefore, commercial marketing is necessary for Ranbaxy to
selectively waive its exclusivity, which in turn requires an approval.
Therefore, we do not see a case for Ranbaxy to transfer its exclusivity,
as once it gets AIP clearance, it would do a site transfer to Ohm’s lab.
Flomax was a post-MMA filing and therefore Ranbaxy did not have
the option of parking the exclusivity in Flomax that it has with Lipitor.
Additionally, the patent on Flomax was to expire on 27 April 2010 after
which Ranbaxy would anyway have lost its exclusivity. Therefore,
Ranbaxy could get ~US$50 mn as settlement on Flomax, whereas
Impax made significant sales of US$176 mn during the two-month
exclusivity period.
What’s the way out for Ranbaxy then?
The best case for Ranbaxy is approval by 30 November 2011, which
is our base case and we value it at Rs60/share. Otherwise, options
depend on how much delay Ranbaxy expects in its approval from 30
November 2011. If the delay expected is not significant, then Ranbaxy
should launch itself, as then it can push other products with Lipitor.
The upside would be reduced significantly as Watson would launch on
30 November 2011 irrespective of Ranbaxy’s approval.
If the delay expected is significant, then Ranbaxy may relinquish its
exclusivity altogether in the hope that it would be able to monetise it
by striking a deal with subsequent filers, as they get to launch their
generic version earlier by six months. And Ranbaxy would still retain
some bargaining power, as it has the option to go to courts and
challenge FDA’s decision and thus delay the entry of the subsequent
generics.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
● With the launch date of generic Lipitor approaching (30 Nov 2011),
we are receiving investor queries whether the Lipitor case can go like
the Flomax or Gemzar cases, implying if Ranbaxy cannot get the
approval, can it cut out a deal with the subsequent filers.
● The US FDA allows the first filer to waive its exclusivity in favour of
another specific generic applicant only once the exclusivity is
triggered. The two conditions which can trigger exclusivity are: (1)
commercial marketing and (2) a favourable court decision.
● In the Gemzar case, Teva could do site transfer, as its exclusivity
was triggered when Sun invalidated the patent. However, in case of
Lipitor, we see a low probability of ‘156 patent being invalidated, and
Pfizer has been settling with the subsequent filers so far.
● Flomax was a post-MMA filing and thus Ranbaxy could not park its
exclusivity and the patent was expiring two months post the
settlement date. The last option now, other than its own approval, is
to altogether give up the exclusivity and strike a deal with
subsequent filers. It is suboptimal, but Ranbaxy has bargaining
power, as it has the option to go to courts and challenge FDA’s
decision.
Lipitor monetisation options for Ranbaxy
With the launch date of generic Lipitor approaching (30 November
2011), we have been receiving investor queries whether Lipitor case
can go like the Flomax or Gemzar cases, implying if Ranbaxy cannot
get the approval of its own product, can it cut out a deal with the
subsequent filers.
● In the Flomax case, Ranbaxy relinquished its exclusivity and, as
part of its settlement agreement with Boehringer, received an
incentive and Impax was the only generic company during the
exclusivity period of March and April 2010.
● In the Gemzar case, Teva after having troubles with its own
manufacturing site, transferred manufacturing to APP and could
retain 180 days exclusivity.
What does Hatch Waxman Act say?
The US FDA allows the first filer to waive its 180 days exclusivity in
favour of another specific generic applicant but only once the
exclusivity is triggered. The two conditions which can trigger
exclusivity are (1) commercial marketing – first generic applicant
launches its product, and 2) a favourable court decision. The law
allows Ranbaxy to waive its exclusivity rights entirely at any time, thus
allowing the FDA to approve all otherwise eligible ANDAs.
How is Lipitor case different from Flomax and Gemzar?
In the Gemzar case, Teva could do site transfer, as its exclusivity was
triggered when Sun pharma invalidated the patent. As per the law
described above, Teva’s exclusivity was triggered.
In Ranbaxy’s case, we see a low probability of subsequent ANDA
filers proving invalidity or non-infringement of ‘156 patent, and
additionally Pfizer has opted for settlement with the subsequent filers
so far. Therefore, commercial marketing is necessary for Ranbaxy to
selectively waive its exclusivity, which in turn requires an approval.
Therefore, we do not see a case for Ranbaxy to transfer its exclusivity,
as once it gets AIP clearance, it would do a site transfer to Ohm’s lab.
Flomax was a post-MMA filing and therefore Ranbaxy did not have
the option of parking the exclusivity in Flomax that it has with Lipitor.
Additionally, the patent on Flomax was to expire on 27 April 2010 after
which Ranbaxy would anyway have lost its exclusivity. Therefore,
Ranbaxy could get ~US$50 mn as settlement on Flomax, whereas
Impax made significant sales of US$176 mn during the two-month
exclusivity period.
What’s the way out for Ranbaxy then?
The best case for Ranbaxy is approval by 30 November 2011, which
is our base case and we value it at Rs60/share. Otherwise, options
depend on how much delay Ranbaxy expects in its approval from 30
November 2011. If the delay expected is not significant, then Ranbaxy
should launch itself, as then it can push other products with Lipitor.
The upside would be reduced significantly as Watson would launch on
30 November 2011 irrespective of Ranbaxy’s approval.
If the delay expected is significant, then Ranbaxy may relinquish its
exclusivity altogether in the hope that it would be able to monetise it
by striking a deal with subsequent filers, as they get to launch their
generic version earlier by six months. And Ranbaxy would still retain
some bargaining power, as it has the option to go to courts and
challenge FDA’s decision and thus delay the entry of the subsequent
generics.
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