Bayer To Begin Ranbaxy Royalties

New Delhi, Nov 2: | Updated: Nov 3 2003, 05:30am hrs
Bayer AG of Germany is expected to soon begin royalty payments to Ranbaxy Laboratories following the launch of the 1 gm dosage of once-a-day ciprofloxacin in the US market.

Bayer, which is the licensing collaborator of Ranbaxy for ciprofloxacin, got the approval from US Food and Drug Administration (USFDA) for 1 gm product in August 2003 and launched it in September.

This triggered the milestone payment for Ranbaxy and the company has received $4 million as the milestone payment during the quarter ended September 2003, taking the total milestone payments received so far from Bayer to $25 million.

As part of the original agreement entered into between Bayer and Ran-baxy, the latter was expected to receive $65 million as milestone payment, which got reduced marginally once the deal was renegotiated.

The balance of milestone payments (over $35 million) is expected to flow in over the next few months. Ranbaxy officials, however, are tight-lipped about the milestone and royalty payments it expects to receive over the next few months. However, they say that payment flows will begin once the product finds acceptability in the US market.

Although Ranbaxy received $4 million as milestone payment and $0.27 million as royalty payment during the July-September 2003 quarter, it fell short of market expectations.

A CLSA (Credit Lyonnais outfit) research report says that the milestone payments fell well below the expectations as they have been deferred. The company is likely to get these payments in 2004 provided Bayer achieves a pre-determined level of revenues for the product.

Ciprofloxacin is a widely used antibacterial and is the original research product of the German MNC, Bayer AG (Bayer). In September 1999, Ranbaxy had signed an agreement with Bayer where it licensed its once-daily formulation of Ciprofloxacin, developed by Ranbaxy, on a worldwide basis to Bayer, while retaining rights to market the product in India and certain other markets.

Ciprofloxacin is meant for treatment of complicated urinary tracts infections (UTIs).

In March 2002, Bayer had filed the New Drug Application (NDA) for 500 gm with USFDA and it received the approval in end of 2002 and the product was launched in the US market in January 2003.

Later in October 2002, Bayer had filed NDA with USFDA to market Cipro (R) XR (ciprofloxacin extended-release) in a once-daily modified release tablet formulation 1 gm and got the approval in August 2003.