Market share gain critical after Lipitor re-entry

Updated: Feb 27 2013, 07:25am hrs

Ranbaxy has announced that it will be able to enter the Lipitor market soon after its product has received a fresh go ahead from the US FDA. The company had initiated a recall from the US market after certain lots were contaminated with tiny glass particles. The recall was limited to the US market and the 10, 20 and 40mg strengths of the drug.

The company has received approval to resume manufacturing of its generic product at the Ohms Labs facility in New Jersey. Ranbaxy had launched generic Lipitor in the US market in December 2011 after the US FDA gave final approval to market its generic version of Lipitor produced at Ohms Labs. In April 2012, Ranbaxy commenced shipping the product from the new Mohali facility. The current production revival, per our knowledge, is limited to Ohms such that there will be limited room for price cuts from Ranbaxy as it aims to regain lost market share.

The product recall, initiated in November 2012, caused Ranbaxys gLipitor market share to fall from a peak of c45% to less than 5%. Despite intense competition, including from Watson, Mylan and Apotex, we expect Ranbaxy to aim for c15% market share within 2-3 weeks of re-launch.

Since the recall, the stock has corrected c25% from the peak of cR550. We believe that the re-entry of gLipitor in the US, coupled with several near-term positive catalysts ahead (including the launch of gDiovan (FTF, expected anytime), and gValcyte (FTF, expected Mar-13). and the good probability of a recovery in US sales). In addition, Absorica (CIP-isotretinoin), launched within the branded segment, has been strong with Ranbaxy already having won over 5% market share within 12 weeks of launch. We are not changing our estimates (which already include a timely gValcyte launch) or valuation at this stage. Our current TP of R482 offers a potential return of c18% from the current level which warrants upgrading the stock to OW (from UW). The key downside risks include limited share gains in the gLipitor market and delays in key first-to-file opportunities in the pipeline.