Many players in the fray; much hinges on USFDA decision

P.T. Jyothi Datta
Deeptha Rajkumar

Mumbai, May 4

It may be too early to celebrate the prospects held out by cholesterol-lowering drug Zocor for Indian generic drug companies like Ranbaxy and Dr Reddy's, say analysts. The reason is that Zocor's exclusivity-related issues remain unresolved by the United States Food and Drug Administration (USFDA).

Despite a recent ruling from the US federal court, perceived to be favourable to Indian drug majors, uncertainty looms over Zocor's future, with the court reverting the exclusivity issue to the USFDA, points out an analyst. Zocor is a $4.5 billion drug.

Earlier this week, a federal court in the US had ruled that the USFDA had unfairly denied Israeli drug company Teva's petition to exclusively market generic forms of Merck & Co's cholesterol drug Simvastatin sold under the brand name Zocor. The court also sent the issue back to the USFDA and herein lies the fate of the Indian drug companies, an analyst said.

If the USFDA sticks to its original position and denies Teva and Ranbaxy 180-days' exclusivity, then the patent on Zocor expires on June 23.

Subsequently, a host of generic companies can make Simvastatin, including Teva, Ranbaxy, Dr Reddy's and Aurobindo, besides other drug companies like Biocon waiting in the wings.

The pie gets divided between several companies and, as witnessed in the case of other drugs going off patent, the price erosion can be up to 95 per cent, he said.

In the event that Teva gets exclusivity on four strengths (5 mg, 10 mg, 20 mg and 40 mg) of Simvastatin and Ranbaxy gets exclusivity on 80 mg of the same drug (estimated to be only $ 500 million of the total Simvastatin market), Merck still has its finger in the pie.

It has authorised Dr Reddy's to make and sell Simvastatin, and will get a share of the sales proceeds, he observed.

Market euphoria

A JM Morgan Stanley report said that an approval for Ranbaxy translates into a 15 per cent contribution to the company's 2006 earnings.

However this could be adversely impacted if there is a delay.

Either way, the euphoria earlier this week in the stock markets over the court ruling was misplaced as there are several players in the market and, more important, much still hangs on the decision of the USFDA, he pointed out.

Dr Reddy's closed on the BSE at Rs 1,645.95, down 0.34 per cent from its previous close.

The stock has appreciated by almost 14.7 per cent, week on week. Ranbaxy ended the day at Rs 509.55, down 0.93 per cent from its previous close.

The counter reflected an 8 per cent gain, week on week.

(This article was published in the Business Line print edition dated May 5, 2006)
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