NEW DELHI: Exactly a week after the promoters of Ranbaxy Laboratories
sold their shareholding to Japanese drug maker Daiichi Sankyo, the
Indian drug maker and US giant Pfizer announced that they have reached
an out-of-court settlement on their litigation over the world's
largest selling drug, Lipitor (Atorvastatin).
According to the settlement, Ranbaxy will launch its generic version
of Lipitor, the $12.7-billion cholesterol-lowering medicine, and
combination drug Caduet in November 30, 2011 in the US with exclusive
marketing rights for 180 days, along with the innovator company.
Industry estimates peg Ranbaxy's revenue upside from the settlement
for Lipitor at $1.5 billion over a four-year period up to May 2012.
Ranbaxy (subject to litigation) was on course to launch its generic
version of Lipitor in the US in March, 2010, 15 months ahead of its
patent expiry in June, 2011. The settlement pushes back the launch
date by 20 months, even though it eliminates all uncertainty regarding
the launch date. In addition, Ranbaxy will also not receive any
upfront payment from the out-of-court settlement.
Says Prabhudas Lilladher's pharma analyst Ranjit Kapadia: "The
settlement brings certainty to Ranbaxy's launch and will cut down
litigation cost for Ranbaxy from tomorrow itself. However, the drug's
launch has been pushed back by 20 months, which means that Pfizer will
get additional sales of around $20 billion during the extended
period."
Ranbaxy has described the deal as a win-win situation. "This is the
largest and the most comprehensive out-of-court settlement ever in the
pharma industry covering a total revenue of over $13 billion. The
revenues will start kicking in from this year as we will be launching
generic version of Lipitor in Canada this calendar year," Ranbaxy
Laboratories CEO and MD Malvinder Singh told ET. A senior Pfizer
executive said the agreement clearly reaffirms the value and
importance of intellectual property.
The settlement was announced after Indian stock exchanges closed on
Wednesday. Ranbaxy shares moved up 2.9% to Rs 598 during the day.
According to industry estimates, Ranbaxy will get a revenue upside of
around $1.5 billion from the Lipitor generic over a four-year period
up to May 2012. Bulk of this revenue will be backloaded and is
expected to accrue when Ranbaxy launches the drug in the US market in
November, 2011.
Lipitor generates annual sales of $8 billion in the US alone. In
Canada, the drug rakes in about a $1 billion in sales every year.
Caduet, a combination drug of Lipitor and hypertension drug Norvasc,
has annual global sales of $400 million.
In addition to the US and Canada, the Indian drug maker will also have
the licence to sell Atorvastatin in six more countries - Belgium,
Netherlands, Germany, Sweden, Italy and Australia - on different
dates. Ranbaxy can launch its Atorvastatin 2-4 months ahead of patent
expiry in these countries. Ranbaxy and Pfizer have also resolved their
disputes regarding Atorvastatin in Malaysia, Brunei, Peru and
Vietnam.
The patent infringement litigation between Pfizer and Ranbaxy relating
to Lipitor will continue in five other European countries - Finland,
Spain, Portugal, Denmark and Romania. "There are certain issues that
needs to be settled in these countries," Mr Singh said.
The agreement pertains solely to Ranbaxy and its affiliates and does
not cover legal challenges to Lipitor patents involving other generic
manufacturers.
For the past few days, there has been speculation that Pfizer would
announce a counter offer for the 65% non-promoter shareholding in
Ranbaxy. While theoretically this option exists, it now appears
remote. It is unlikely that Pfizer would have negotiated an out-of-
court settlement with Ranbaxy if it had intentions of launching a
hostile bid for the company.
It is learnt that Ranbaxy promoters' discussions with Daiichi Sankyo
were going on parallely with the company's negotiations with Pfizer.
Some experts tracking the pharma sector feel that given the nature of
the out-of-court settlement, which will not result in any windfall
payment for Ranbaxy, it is possible that the Indian company wanted to
first announce the stake sale.
Pfizer's president of Worldwide Pharmaceutical Operations Ian Read
said: "The agreement provides patients with access to a generic
product much earlier than if Ranbaxy were unsuccessful in obtaining
approval for its product and overcoming the relevant patents. It
provides substantial certainty regarding the timing of the entry of a
generic version of Lipitor. Finally, the agreement clearly reaffirms
the value and importance of intellectual property and this country's
(US) well-balanced system of creating incentives to develop innovative
medicines while at the same time establishing a strong generic drug
business."
Chryscapital MD and pharmaceutical expert Sanjiv Kaul said that other
Indian companies should also go for similar settlements. "Litigation,
for Indian pharma companies, is a costly proposition. They should
always look for a possible collaborative approach rather than a
confrontational approach. One should use the Para IV for positioning
itself as a global supplier of authorised generics to MNCs."
An industry source said Ranbaxy opted for the settlement route as it
wanted to cut down on litigation costs, which would have quadrupled
when the case moved to higher courts. Also, Daiichi Sankyo, which
bought the Ranbaxy promoter's 35% stake, would not have been keen on a
pursuing a legal fight with Pfizer.
The settlement also resolves the patent litigation between the
companies involving the branded drugs Accupril (in the US) and Viagra
(in Ecuador) and all patent litigations with Ranbaxy relating to
generic formulation of Quinapril Hydrochloride in the US and
Sildenafil in Ecuador.
