AstraZeneca settles patent deal with Ranbaxy

European multinational AstraZeneca today announced an out-of-court settlement with Ranbaxy on a pending patent infringement litigation on its heartburn medicine esomeprazole. Sold under the brand name Nexium, esomeprazole is the second largest selling drug in USA with total annual market sales of $5.5 billion. The agreement will permit Ranbaxy to commence exclusive sales of a low-cost version of esomeorazole for 180 days from May 27, 2014, the date on which AstraZeneca's key patent on Nexium expires.

The deal, which could bring in revenues worth $1.25 million to $1.5 million for Ranbaxy over a period of six years, allows Ranbaxy to supply raw materials (bulk drugs) for the manufacture of Nexium to AstraZeneca from May 2009 and manufacture a portion of AstraZeneca's US supply of Nexium from May 2010. The firms have also entered into agreements designating Ranbaxy as the US distributor for authorised generic versions of Plendil (felodipine) and 40mg Prilosec (omeprazole).

In return, Ranbaxy has acknowledged that all six patents on Nexium asserted by AstraZeneca in the patent litigation are valid and enforceable. AstraZeneca has stated that Nexium have expiration dates that range from 2014 through 2019.

"The agreement has provided certainty to the launch of our generic version of Nexium in the US market. This is the second out-of-court settlement for Ranbaxy in 2008 and the fifth such settlement in last two years," Malvinder Mohan Singh, CEO and Managing Director, Ranbaxy said.

Ranbaxy and AstraZeneca have filed a Consent Judgment with the US District Court for the District of New Jersey reflecting the terms of the settlement agreement.

Though the litigation with Ranbaxy has been settled, AstraZeneca will continue Nexium patent infringement litigations against other generic players Teva/IVAX and Dr Reddy's Laboratories.

Ranbaxy had on February 7, 2008 said that it received tentative approval from the US Food and Drug Administration (USFDA) for marketing esomeprazole magnesium delayed-release capsules, 20 mg (base) and 40 mg (base). The agreement settles a three year old the patent infringement litigation filed by AstraZeneca following Ranbaxy's submission to the USFDA for marketing approval of a low cost version of Nexium.

Ranbaxy stock prices at BSE rose 8.62 per cent or Rs 38.25 to close at Rs 481.8 today.

Solrex close to open offer trigger for Orchid Chem

Solrex Pharmaceuticals, believed to be a Ranbaxy Laboratories-promoted company, has reportedly increased its stake in Chennai-based drug major Orchid Chemicals and Pharmaceuticals to 14.72 per cent — just short of the 15 per cent mark that will trigger an open offer to acquire the cephalosporin drug major.

A TV channel reported today that Solrex has increased its stake in Orchid to 14.72 per cent in bulk share purchase deals on Friday. The channel also said other Ranbaxy promoter group companies might have also garnered shares in Orchid.

According to the National Stock Exchange (NSE) data available yesterday, Solrex had 12.84 per cent stake in Orchid, all acquired in different deals after March this year.

The development could not be confirmed with the stock exchanges and Orchid. An official spokesperson of Orchid said he was yet to get details of the share purchase data of Orchid. Ranbaxy officials declined to comment on the developments.

A few days ago, Malvinder Mohan Singh, the managing director and chief executive officer of Ranbaxy, had stated that the company was against any hostile takeovers.

Orchid maintained that Solrex was understood to be an investment unit of Ranbaxy and the share purchases by Solrex were value picking rather than a takeover attempt.

Orchid’s Chairman and Managing Director K Raghavendra Rao has only 15.9 per cent stake in Orchid. In case of an open offer, one option before him is to utilise the warrants worth about Rs 50 lakh, which can be converted into a 7 per cent stake. This would increase Rao’s stake close to 23 per cent, said sources.

Reportedly, the Orchid management is in talks with financial institutions to convert the warrants and to rope in strategic investors to thwart the takeover attempts.

“We are observing the developments, but have not taken any decision on conversion of the warrants,” said the company spokesperson. Both Raghavendra Rao and Deputy Managing Director C B Rao are still away in Japan, as a part of the opening of a subsidiary of Orchid in Japan.

Life Insurance Corporation of India and United India Insurance Company hold 7.8 per cent and 2.48 per cent, respectively in Orchid.

Other large institutional investors in the company include Gazal Industrial Holdings (8.48 per cent), Macquarie Bank (5.13 per cent), Harpline (4.54 per cent) and Fidelity Trustee Company (2.66 per cent).

No hostile takeovers: Ranbaxy

In an interesting twist to the Solrex-Orchid saga, Ranbaxy Laboratories today said it is against hostile takeover of any Indian pharmaceutical company.

Solrex Pharmaceuticals, which is believed to be an investment firm of the Ranbaxy promoters, has picked up a 12 per cent stake in Orchid Chemicals.

A top Ranbaxy executive told Business Standard today that the company is against any hostile takeovers and refused to either confirm or deny whether Solrex is indeed owned by promoters, Malvinder and Shivinder Singh.

He, however, said, Ranbaxy has not gone in for any hostile takeovers so far and its investments in domestic pharmaceutical companies such as Krebs Biochemicals and Industries, Jupiter Biosciences and Zenotech Laboratories were only strategic investments.

Industry analysts said the Singh brothers will adopt the same model for Orchid.

Orchid’s share prices, which went up 34 per cent in the last two trading days following reports of a possible creeping acquisition by Solrex, today fell 3.06 per cent on the Bombay Stock Exchange (BSE) to Rs 232.60 at close of trading.

Ranbaxy holds 14.9 per cent each in Jupiter Biosciences, a leading peptide manufacturer, and active pharmaceutical ingredients (API) maker Krebs Biochemicals, besides a 48 per cent stake in Zenotech Laboratories, a Hyderabad-based manufacturer with a good pipeline of cancer drugs and biopharmaceuticals.

It has strategic product supply and research and development alliances with all three companies.

Over the past two to three years, Orchid’s name had figured in most of the reported takeover attempts by overseas pharmaceutical companies like Teva of Israel, Novartis’s generic arm Sandoz and Pfizer.

Ranbaxy to sell bio-generic osteoporosis drug

Ranbaxy Laboratories today announced the launch of Bonista - teriparatide injection (recombinant human parathyroid hormone) - for the treatment of osteoporosisin in association with Virchow Biotech, Hyderabad,

Ranbaxy is the first company to launch this bio-generic product in the world.

"Ranbaxy has a number of new products in its pipeline including Bonista for Osteoporosis patients who are normally treated by orthopaedics and gynaecologists. Bonista is also a classic example of our endeavour to offer quality bio-generic options to doctors and an affordable and efficacious product to patients," said Sanjeev I Dani, senior vice president & regional director (Asia & CIS), Ranbaxy.

Indian drug firms top filings with USFDA

Indian pharma companies have filed the maximum number of drug master filings (DMFs) to the US Food and Drug Administration (US FDA) in October-December 2007 quarter.

The total number of DMFs filed to the US FDA in the last quarter was 187, Indian companies alone filing for 89 DMFs, according to data gathered from analysts and industry sources. Indian DMFs filing accounting for 47.6 per cent of the total DMFs filed in the last quarter.

DMFs are confidential, proprietary assets that present to the US FDA the formulae, processes, test methodology, and other data relevant to the manufacture of products used in the composition, packaging and processing of pharmaceuticals or biologics. DMFs filings from the Chinese pharma players to the US FDA amounted to less than 20.

Amongst the Indian pharma players, Ranbaxy has filed 13 DMFs to the US FDA in the last quarter, while both Dr Reddy’s and Aurobindo Pharma filed 10 DMFs, add analysts.

Ranbaxy is understood to have filed a DMF for cilastatin to the US FDA in the last quarter. Analysts say Cilastatin is not a drug in itself, it is administered along with the antibiotic imipenem, to prevent the latter from being inactivated by the enzyme dehydropeptidase.

Ranbaxy: Prescription for growth

Indian drug firms are looking at ways to unlock value for shareholders as also bring down R&D costs. Close on the heels of Sun Pharma, the Rs 4,366 crore Ranbaxy plans to demerge its new drug discovery research unit, Ranbaxy Life Science Research (RLSRL).

Shareholders will get one share of RLSRL for every four held in Ranbaxy. In CY 07, Ranbaxy's R & D costs at Rs 416 crore, were higher by about 8 per cent than that in the previous year. In CY06, however, the R&D spend actually fell over that in CY05.

However, as a percentage of total operational income, R & D costs remained at more or less the same level of 9.5 per cent in both years. The annual savings for Ranbaxy, post the demerger could be about Rs 100 crore.

Meanwhile, the next 18 months should see Ranbaxy ramp up overseas sales. That’s because it has managed to acquire permission to exclusively sell certain drugs that treat benign prostatic hyperplasia and herpes. Typically these exclusivity periods last for six months.

Besides, the management has said it will increase focus on some geographies. In CY07, overseas sales contributed 72.5 per cent Ranbaxy’s top line. Over the past one year, Ranbaxy has gained 32 per cent as compared to a 38 per cent rise in the Sensex.

Sun Pharma’s research subsidiary SPARC, trades at Rs 99, and has gained about 14 per cent since listing. At Rs 445, Ranbaxy trades at 19 times estimated CY 08 earnings, estimated at 23 levels, with a seven per cent upside coming in from the savings on R&D.

Sun, at Rs 1259, trades at a slightly lower multiple of 18 times estimated FY 09 earnings and both stocks are likely to be outperformers.

Ranbaxy to demerge drug discovery unit

Ranbaxy Laboratories will demerge its new drug discovery research (NDDR) unit to a subsidiary, Ranbaxy Life Science Research, subject to requisite approvals.

According to a release issued by Ranbaxy to the BSE today, the company believes this is a significant step in creating an independent pathway for NDDR with dedicated resources and an enhanced focus for long-term growth.

"The demerger will result in cost savings of approximately $25 million in the current year for Ranbaxy," the release added.

Under the scheme of demerger, the shareholders of Ranbaxy will be entitled to receive one equity share of Re 1 each of Ranbaxy Life Science Research without any payment for every four equity shares of Rs 5 each held in Ranbaxy on the record date.

All assets, liabilities and research personnel associated with the NDDR unit will be transferred to Ranbaxy Life Science Research.

Ranbaxy oesophagitis drug gets USFDA nod

Ranbaxy Laboratories, generic drug manufacturer, today said it has received tentative approval from the US Food and Drug Administration (USFDA) for Esomeprazole Magnesium Delayed-Release Capsules, 20 mg (base) and 40 mg (base).

Nexium (Esomeprazole) is the second largest selling drug in USA with total annual market sales of $5.5 billion (IMS — MAT: December 2007).

Ranbaxy believes that it has a first to file (FTF) status on the drug, providing it with a potential 180 days marketing exclusivity, thereby offering a significant opportunity in the future.

Esomeprazole is indicated for the short-term treatment (4 to 8 weeks) in the healing and symptomatic resolution of diagnostically confirmed erosive oesophagitis, to maintain symptom resolution and healing of erosive oesophagitis and for treatment of heartburn and other symptoms associated with gastroesophageal reflux disease (GERD).

Ranbaxy Pharmaceuticals Inc. (RPI) based in Jacksonville, Florida, is a wholly owned subsidiary of the company. RPI is engaged in the sale and distribution of generic and branded prescription products in the US healthcare system.