New Delhi/Washington/ New York: A week after the Singh family sold its controlling 34.8% stake in Ranbaxy Laboratories Ltd to Japan’s Daiichi Sankyo Co. Ltd, India’s largest drug maker and Pfizer Inc. agreed to keep copies of cholesterol pill Lipitor off the American market for an extra 20 months, a move that may generate an additional $20 billion (Rs85,800 crore) for the US drug maker.
The lawsuit settlement, which was discussed as part of Daiichi’s deal with Ranbaxy, according to a person familiar with the matter, could generate more than $1.5 billion in future revenues for the Indian company.
Under the terms of the settlement, Ranbaxy’s fifth and biggest such deal to date, the Indian firm won’t sell generic or off-patent versions of Lipitor, the world’s best-selling drug, until November 2011. Analysts had projected Ranbaxy would enter the market in March 2010, when the main patent expires, while Pfizer was using litigation to delay competition till 2016.
The settlement promises Ranbaxy a six-month run with limited market competition. Ranbaxy will no longer challenge the validity of Pfizer’s patent and get the licence to sell the cholesterol drug in seven countries besides the US— Canada, Belgium, Germany, the Netherlands, Australia, Sweden and Italy. Disputes have also been resolved in Malaysia, Brunei, Peru and Vietnam, while the litigation will continue in five European nations of Finland, Spain, Portugal, Denmark and Romania.
Ranbaxy’s managing director Malvinder Mohan Singh said the countries covered under the agreement cover “over 90% of the market” for atorvastatin (the generic name for Lipitor) and added that the deal comes with a “huge revenue upside” and “revenue certainty” for the company. Shares of Ranbaxy closed 2.88% higher at Rs598.20 each on the Bombay Stock Exchange on Wednesday on a day when the benchmark Sensex closed 1.8%??lower?at?15,422.31 points.
The agreement also settles a lawsuit over the Viagara impotence drug pending in Ecuador, and one over blood pressure medicine Accupril pending in New Jersey. Ranbaxy will also get to launch Pfizer’s blood pressure and cholesterol drug, Caduet, in the US with a six-month exclusive market run, on the very day it begins selling Lipitor.
The deal buys Pfizer chief executive officer Jeffrey Kindler more time to find new drugs to replace as much as $12 billion a year at risk when Lipitor copies become available. Investors have been sceptical that Kindler, a former lawyer, can offset the losses with a plan that includes increasing sales of current products, cost-cutting and speeding new drugs to the market. Since Kindler took command in July 2006, Pfizer, the world’s biggest drug maker, has lost 32% of its value.
Shares of Pfizer rose more than 2% to $18.09 at 9.20pm India time on the New York Stock Exchange.
Daiichi Sankyo, Japan’s third largest drug maker, had said on 11 June that it would buy Ranbaxy for as much as $4.6 billion. On 13 June, Ranbaxy’s shares rose to a three-year high after Business Standard newspaper reported Pfizer may make a hostile bid for the Indian firm. On Tuesday, Pfizer said it is not buying Ranbaxy.
Analysts here said the deal would benefit Ranbaxy.
“It delays (Ranbaxy’s Lipitor) generic entry in US by 20 months, but gives them certainty of launch and revenues,” said Awadhesh Garg, sector analyst with Mumbai-based equity firm Kotak Securities Ltd, who has a “hold” rating on the Ranbaxy stock and estimates benefits of more than $1.58 billion—the bulk of it from Lipitor—will accrue to the Indian company in 2011 and 2012. “With this deal, Ranbaxy has saved on its litigation expenses across countries, secured a certain date for product launch as well as an assurance from the innovator that it will assist them in securing a marketing approval from US FDA (Food and Drug Administration),” he added.
The global settlement of Lipitor patent litigations between Ranbaxy and Pfizer was part of Daiichi Sankyo’s negotiation with Ranbaxy. “At the time of final negotiation, both the companies had discussed settlement of litigations with GSK Plc., AstraZeneca International and Pfizer. While patent litigations with GSK and AstraZeneca had been settled before signing the deal, Lipitor cases, being the largest among others, got delayed a bit,” said the person familiar with the matter.
In the past year, Ranbaxy has settled with AstraZeneca Plc. on its $7 billion-in-sales heartburn drug Nexium, GlaxoSmithKline Plc. on its $985 million-in-sales migraine medicine Imitrex and its anti-herpes drug $1.3 billion-in-sales Valtrex. It also entered into an agreement to drop the patent challenge with Boehringer Ingelheim/Astellas Pharma for the $1.2 billion-in-sales prostate drug Flomax.
In May, while releasing a report that showed an increase in such settlements, William E. Kovacic, chairman of the US Federal Trade Commission (FTC), the country’s competition regulator, said that this “confirms that settlements with potentially anti-competitive arrangements continue to be prevalent”. However, Singh was confident that the settlement with Pfizer would not come under the scanner of FTC. Ranbaxy and Pfizer will be filing documents with FTC as part of a standard settlement procedure.
Susan Decker and Shannon Pettypiece are with Bloomberg News. Mint’s C.H. Unnikrishnan contributed to this report from Mumbai.