The approval for Ranbaxy?s generic version of Aricept is another positive outcome in the company?s efforts to regain lost ground in the US. We believe generic Aricept could potentially add Rs16/share during the exclusivity period, depending on how much market share it is able to achieve, and that it should remain an important product beyond as well. Moreover, this should once again highlight the intrinsic value in Ranbaxy?s FTF pipeline, which is underappreciated by the street in our view?maintain buy.
While Ranbaxy has been confident of its ability to monetise all its FTFs, we believe an approval is the best possible outcome. Not only does Ranbaxy retain the entire exclusivity upside but it should also ensure that upside from the product sustains beyond the exclusivity period.
The FDA had recently clarified that Ranbaxy is sole FTF for Aricept and this approval now paves the way for a launch. Ranbaxy will be the only generic company in the market (other than an Authorized Generic version) for 180 days (through to May ?11).
Aricept has annual sales of cUS$2.4 billion in the US. We believe this product could potentially add cUS$300 million & cUS$150million to Ranbaxy?s revenues & net income during the 6m exclusivity period (assuming 40% price erosion, 45% market share & 50% NPM) ? which would imply upside of cRs16 to EPS. However, we await initial market share trend data before accounting for this product in our forecasts.
One of the primary factors behind our contrarian Buy rating on the stock is the higher value we ascribe to its FTF pipeline. Ranbaxy?s continued success in monetizing this pipeline ? Valtrex, Aricept (on time launch), Imitrex, Prava 80mg, Zocor 80mg (delayed launch but exclusivity retained) & Flomax (no launch but settled) ? should lead the street to better appreciate the value on this front.