Ranbaxy looks set for windfall after generic Aricept approval

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The loss of brand exclusivity for Aricept, Eisai’s blockbuster Alzheimer’s disease drug, is set to be one of the most painful US patent expiries this year. So Ranbaxy Laboratories’ shareholders were understandably delighted when news emerged of clearance for the Indian company to launch the first generic version (Ranbaxy could reap big rewards with Aricept exclusivity win, September 23, 2010).

Aricept, marketed by Eisai and Pfizer, sold $2bn in the US alone last year. As the first company to market with a cheap, copycat pill and the all important 180-day exclusivity, Ranbaxy should be in for a significant windfall - analysts at Nomura estimate it could book $250m in sales over the exclusivity period. Although the news is as yet unconfirmed by the company or the FDA, Ranbaxy shares climbed 5% today, to Rs574.

Two-pronged

The approval is a two-pronged win for Ranbaxy, which has endured a two-year import ban by the FDA and US Department of Justice because of manufacturing problems at India-based facilities.

Various reports have suggested the company will manufacture the drug, generically called donepezil, for the US market from its New Jersey facilities at Ohm Laboratories. Analysts believe this bodes well for future US approvals, particularly any other first-to-file applications the company has, most importantly over Pfizer’s Lipitor. The mega-blockbuster, which loses patent protection in November 2011, is forecast to sell $5.12bn in the US this year.

Aricept lost patent protection on November 25 and, up until the FDA's decision, there was uncertainty over whether Ranbaxy would win approval given the import ban.

However in a research note today UBS analysts point out that this is the third first-to-file approval the company has delivered since the import ban began. It also had 180 days exclusivity on migraine therapy sumatriptan (Imitrex), which Ranbaxy began to sell in 2008, and herpes treatment valaciclovir (Valtrex); both previously marketed by GlaxoSmithKline.

Capitalising

This third success suggests the ban is not preventing the company from capitalising on these advantages in the US. Ranbaxy’s management has been predicting these issues are on the road to being resolved for some time now, Aricept’s approval seems to back up these claims.

If the initial filing for donepezil was made from Ranbaxy’s Indian manufacturing facility, the FDA approval would have been made on the basis of a site transfer to the US. If so, the company is likely to have to go through the same process for Lipitor. It is not clear if the Lipitor application was filed from India; however, analysts reckon the company would likely be in the process of transferring manufacturing sites now as part of its preparations.

Analysts at Nomura reckon the six-month exclusivity will add $162m to earnings over the six month period, and agree that Ranbaxy’s track record so far in capitalising on its first-to-file generics bodes well for Lipitor’s patent expiry next November.

So all good news for Ranbaxy, less so for Eisai, which faces the painful loss of by far its biggest product (Event – Chemo keeps Eisai from cliff edge but pipeline must pull its weight, November 16, 2010). Shares in the Japanese company, which is sorely in need of big growth drivers, saw a 1.3% dip in share price to 2864 Yen at the start of trading.

Eisai's stock has been on a gradual decline since the end of 2006 as this event has approached, and the company is in need of a product able to bring a turnaround. By contrast, Ranbaxy is at a five-year high, expected to climb further still.

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