Delayed Diovan generic emerges – Valcyte and Nexium next?

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All good things must come to an end, and that includes the reign of Novartis’s onetime best-seller Diovan. The hypertension drug has now fallen to US generic competition from Ranbaxy Laboratories, though the Indian group’s difficulties with certifying some manufacturing facilities meant that Novartis had enjoyed a windfall that amounted to billions of dollars in the meantime.

Victory came at a price for Ranbaxy as it achieved FDA approval only by buying active pharmaceutical ingredients from an unnamed outside source, to which it will pay an undisclosed share of the profits. But, even at this cost, Ranbaxy has broken down a regulatory roadblock that should help it bring other copycat pills to market, namely generics of Roche’s Valcyte and AstraZeneca’s Nexium (see table).

Fumble

Diovan’s US patents technically expired in 2012, and as Ranbaxy had first-to-file status it was granted 180 days of exclusive marketing under US law. However, its generic factories in India were under a regulatory cloud that prevented it from capitalising on its prize, and there was some danger that its exclusivity would be rescinded if it failed to win approval of its generic by a certain date (Clock ticks for Ranbaxy as Novartis continues to reap Diovan revenues, October 22, 2013).

Clearance of a facility in New Jersey run by a subsidiary, Ohm Laboratories, was the step Ranbaxy needed to clear the drug for US approval; this also raised hope that Valcyte and Nexium could be next up. Shares in Ranbaxy, which is being absorbed into the fellow Indian group Sun Pharmaceutical Industries, rose 5% to INR497.25 ($8.27) today on the news; Sun was up 4%, to INR660.65.

Pity Daiichi Sankyo, which perhaps missed an opportunity to cut its losses from a disappointing purchase of a majority stake in Ranbaxy by waiting a few weeks (Daiichi’s ill-timed Indian foray ends in minority Sunbaxy stake, April 7, 2014). Certainly, this could be a sign for Daiichi to begin heading for the exit.

Current sales expectations for Ranbaxy's FTF targets
US sales ($m)
Product Company 2013 2014e 2016e 2020e Patent Expiry
Diovan Novartis 1,679 872 121 49 Sep 2012
Nexium AstraZeneca 2,123 1,030 57 3 May 2014
Valcyte Roche 386 343 161 99 Sep 2015

Source: EvaluatePharma

Eulogy

There will not be cheering in Novartis’s Basel headquarters, but then again there might not be too much grief, either. Diovan was about to lose its exclusivity, one way or another. Had Ranbaxy been unable to manoeuvre an approval, the FDA was almost sure to rescind its first-to-file standing and authorise another generic competitor.

Instead of mourning its loss, Novartis should celebrate Diovan’s extra lease of life. The group has collected US sales of more than $6bn since the patent officially expired in September 2012, and a product at the end of its life-cycle will be highly profitable.

In any case the generic's advent exceeded the expectations that Novartis had laid out in its 2014 guidance in January, when it assumed entry early in the second quarter. Likewise, Astra should be somewhat thankful as it assumed generic versions of Nexium would enter towards the end of May. So far there has been no sign of competition.

Novartis has been working towards renewing its cardiovascular disease franchise, first with serelaxin, which could have life yet, and then with the more recent clinical success of LZQ696. Neither will be the huge seller that Diovan was, but if both are launched they will help Novartis overtake Astra as the number one in cardiovascular disease.

To manage that even after losing a $6bn-a-year drug would be an accomplishment.

To contact the writer of this story email Jonathan Gardner in London at jonathang@epvantage.com or follow @JonEPVantage on Twitter

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