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BL Research Bureau

The Ranbaxy stock closed nearly 3 per cent up on Monday after the company launched generic Omeprazole capsules (to mainly treat ulcer) through its US subsidiary.

It launched the drug as an authorised generic of AstraZeneca’ Prilosec (brand name), in a common strategy employed by innovator companies.

This allows them to prolong the life of a brand by producing the prescription drug and marketing it under a private label. Ranbaxy, by virtue of an April agreement, is the US distributor for the authorised generic version of Omeprazole 40mg, a drug with $200 million in annual sales.

While the deal and details were in public domain for nearly four months, investors seemed to take fresh note of the actual launch on Monday.

The launch is likely to provide a boost to Ranbaxy’s September quarter earnings. Ranbaxy will be compensated for its distribution services on ‘standard commercial terms’.

Authorised generics compete with generic products and attempt to grab equivalent market share as they have same ingredient, at a competitive price.

In this case, AstraZeneca, through its deal with Ranbaxy, may be preparing to protect its turf against Mylan, which won a longstanding battle in court this year and might launch generic Omeprazole (40 mg) soon.

With Ranbaxy launching its version, the market for this particular drug will be shared between at least three players, when Mylan launches its generic version of the same.

Price erosion is likely to be less steep due to less number of players.

Ranbaxy may not be marketing the authorised generic for more than six-nine months but would end up with good margins during the tenure.

The ‘Omeprazole deal’ may also be perceived as one of the profit-sharing agreements that have been stitched up to ‘compensate’ Ranbaxy for agreeing to delay the launch of generic Nexium, AstraZeneca’s top drug, till 2014.

More Stories on : Stocks | Pharmaceuticals | Ranbaxy Laboratories Ltd

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