Reaches Out-Of-Court Pact With Innovator Pfizer
EXACTLY a week after the promoters of Ranbaxy Laboratories sold their shareholding to Japanese drug maker Daiichi Sankyo, the Indian drug maker and US pharma giant Pfizer on Wednesday announced that they have reached an out-of-court settlement for their global 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 — on November 30, 2011, in the US with an 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 running up to May 2012. At present, 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. This 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 Prabhudhas 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 winwin 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, on his part, said the agreement clearly reaffirms the value and importance of intellectual property. GENERIC VERSION OF BLOCKBUSTER DRUG TO DEBUT IN US IN NOV 2011
2003 Ranbaxy files para IV application for Lipitor. Pfizer sues Ranbaxy for patent infringement, automatic 30-month stay AUG 2006 RANBAXY invalidates Pfizer's ‘995 Lipitor US patent
DEC 2006 AUSTRALIAN Federal Court grants decision to Ranbaxy JAN 2007 CANADIAN Federal Court grants favourable decision to Ranbaxy
FEB 2007 RANBAXY launches Atorvastatin in Denmark MAR 2007 PFIZER files re-issue application for Lipitor in the US
MAR 2008 PFIZER sues Ranbaxy for additional patent infringement in US court MAY 2008 RANBAXY gets mixed verdict on Pfizer's Lipitor
JUN 2008 RANBAXY settles Lipitor litigation with Pfizer Can sell Atorvastatin in 6 more countries
While the out-of-court settlement was announced after Indian stock exchanges closed on Wednesday, Ranbaxy shares moved up by 2.9% to Rs 598 during the day. According to industry estimates, Ranbaxy will get a revenue upside of around $1.5 billion from anti-cholesterol medicine Lipitor alone in a four year period running upto May 2012. The bulk of this revenue will be backloaded and is expected to accrue when India’s largest drug maker launches its drugs 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 on varying dates in six more countries — Belgium, Netherlands, Germany, Sweden, Italy and Australia.
Ranbaxy can launch its Atorvastatin 2-4 months ahead of their patent expiry in these respective 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 for patents in these countries,” Mr Singh added.
The agreement pertains solely to Ranbaxy and its affiliates and does not cover legal challenges to the Lipitor patents involving other generic manufacturers.
For the last 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 appears 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 the Ranbaxy promoters’ discussions with Daiichi Sankyo were going parallel 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 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 follow similar amicable settlement routes, “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 added that Ranbaxy opted for the settlement route as it wanted to cut down on litigation cost, which would quadruple when the cases moves to higher courts. And also, Daiichi Sankyo, which recently bought the Ranbaxy promoter’s 35% stake, would not have been keen on taking the legal fight with Pfizer.
The settlement also resolves additional patent litigation between the companies involving the branded drugs Accupril (in the US) and Viagra (in Ecuador) and all patent litigation with Ranbaxy relating to generic formulation of Quinapril Hydrochloride in the US and Sildenafil in Ecuador.
