Mylan’s Gain May Be Ranbaxy’s Loss

Shares of pharma company Ranbaxy are showing high volatility on the news that it has lost 180 day exclusivity for the generic of Diovan. As per the recent media reports, US generic giant Mylan has sued the US Drug regulator, US FDA for not allowing it to market the product after the innovator Novartis lost the patent on 21st September 2012. Earlier it was considered that Ranbaxy would be able to market the drug.

The management of the company in all its recent interactions had been saying that it was hopeful to launch its all First to File (FTF) products at the right time. Mylan however said that Ranbaxy failed to get a tentative approval for the product prior to the statutory 30-month forfeiture deadline. It also said that for the forfeitures there would be no statutory exception applicable.

Diovan is one of the biggest revenue generating drugs having world market of USD 5.7 billion as per Novartis annual report. Last year Diovan generate over 1 billion in sales in USA alone. Launch of Diovan would have given between Rs 500 to 1000 crore of additional revenue to Ranbaxy during the exclusivity period.

Last year in a similar case, Mylan was attempting Ranbaxy’s exclusivity of Lipitor. Ranbaxy however successfully launched Generic of Lipitor which was the biggest drug in the history of the pharmaceuticals at that time. Company raked in about USD 600 million (about Rs 3100 crore) by selling Lipitor.

After Ranbaxy’s consent decree most analysts were expecting that the company may have given up three FTFs but the company had been saying that it remains confident about launchings its FTF products. The company however has lost two FTF opportunities i.e. Provigil and Actos. In case of Provigil, Mylan launched the product. Actos Ranbaxy launched Actos as an authorized generic and it shares the exclusivity with Mylan and Teva. These two missed opportunities have dragged the stock down from its new 52 week high.

Diovan case makes Ranbaxy’s stock little speculative unless the management comes forth and says whether it still expects to launch the product. For now we would advice to investors to ‘hold’ the stock.