Lipitor a long-term cash cow for Ranbaxy

Generic Lipitor may end up clocking revenue of over $250 million for Ranbaxy in the US market in calender year 2013 and 2014, according to projections by sector analysts. This forecast is built on the assumption that once the prices of Atorvastatin is slashed owing to generic competition, the drug could increasingly substitute other competing drugs with the same therapeutic profile such as Simvastatin and Rosuvastatin.

?Ranbaxy, given its early entrant advantage, will be the prime beneficiary of Atorvastatin`s market expansion. We see Ranbaxy continuing to maintain at least 20% share of the Atorvastatin market even after generic competition picks up later (after the six month first to file exclusivity period of Ranbaxy is exhausted in May). Even by conservative assumptions of growth in prescription volumes, Atorvastatin can be a $120 million recurring sales product for Ranbaxy. If prescriptions grow faster and register 100% volume growth Ranbaxy?s Lipitor related revenues may expand by $100 million more in calender year 2013 to $223 million,? says Nitin Agarwal of IDFC securities.

This factors in a price erosion of 90% from $4 to 40 cents per tablet, once other generic players Teva, Mylan, Dr Reddy?s and possibly Apotex jump into the Lipitor fray in May 2012.

At present three players Pfizer, which owns the patented product Lipitor, Watson, the US generic firm authorised by Pfizer, and Ranbaxy, the firm which won the 180-day exclusive marketing opportunity for the drug, are battling for market share of Atorvastatin in the US.

Pfizer?s market share in the Atorvastatin would continue to erode further, Watson CEO Paul Bisaro said in an investors? conference. He earlier maintained that the innovator firm may hang on to 40% of market share on the back of aggressive discounts and marketing strategy it has adopted. On last count, Pfizer?s share of the pie had already plunged to 41% in the last week of December. A Ranbaxy spokesperson said the company doesn?t share guidance regarding product specific revenues.

?We expect Atorvastatin to gain share from both generic Simvastatin as also Rosuvastatin under patent and priced at a significant premium, given the higher efficiency and lower pricing post-exclusivity and the gold standard recognition that Atorvastation enjoys in this therapy. At one-tenth of the current price ($4/tablet), Atorvastatin can give serious competition to these two drugs,?says Vineet Chandak of IDFC securities.

In terms of volumes, the competing drugs ? Simvastatin and Rosuvastatin ? at 5.7 billion tablets enjoyed three times the sales of Lipitor in 2011 which sold 2 billion tablets. While Simvastatin generated 100 million prescriptions and Rosuvastatin commanded 25 million prescriptions, Lipitor was prescribed 42 million times in 2011.

While initial estimates predicted that the exclusivity period for generic Lipitor may contribute up to $500 million in Ranbaxy?s kitty, these estimates were significantly tempered after three developments ? Ranbaxy?s disclosure that it would share profits with Israeli drugmaker Teva, a declaration stating that formulations would roll out of US facility and Pfizer?s aggressive market share retention strategies.