Pharmaceuticals: Due to carcinogenic impurities found in Ranitidine, there could be disruptions in supply of product

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Updated: September 21, 2019 2:27:24 AM

DRRD re-launched isotretinoin caps recently. The market share is now at 3.4%, up 110bps w-w. This is a limited competition product, and we expect DRRD to record ~$10 mn+ in annualised sales from the product over time.

Pharmaceuticals, carcinogenic, impurities, Ranitidine,NDMA, pharma industry, Pregabalin, IsotretinoinOn losartan tabs, there has been a churn in market share.

The USFDA last week mentioned that it has detected nitrosamine impurity NDMA (N-nitrosodimethylamine) in Ranitidine (brand Zantac). These impurities are considered carcinogenic and a similar issue was raised for sartans earlier. Though USFDA hasn’t yet announced any recall, there can be disruptions with respect to the product supply in case the quantity of NDMA is found to be above the desired levels. Ranitidine, which is used for the treatment of heartburn or acidity, is sold under prescription and OTC (over-the-counter).
Indian companies that are selling the product in the US include Wockhardt, Dr Reddy’s (DRRD), Sun Pharma, Glenmark (GNP), Aurobindo, Zydus Cadila, Strides, Ajanta and Granules. The sales contribution is high for Dr Reddy’s, Glenmark and Strides. DRRD (DRRD IN, Buy) also has exposure to the OTC market. For DRRD, the revenue contribution will be less than $20mn in our view. For GNP (GNP IN, Buy), the revenue contribution is likely to be ~$10-15mn, as per our estimate.

Pregabalin market share: In pregabalin caps (brand sales: $3.5 bn), around 10 generics have launched post patent expiry. DRRD and MSN Labs are the largest players with ~15% market share each. Cipla has 11% market share. We expect significant price erosion as several players have entered the market. We expect DRRD to clock ~$5mn+ in annual sales initially given the market share gains thus far. We also note that volumes for pregabalin could grow over time as volumes shift from gabapentin. We note that gabapentin volumes are ~6x of the pregabalin.

Isotretinoin market share: DRRD re-launched isotretinoin caps recently. The market share is now at 3.4%, up 110bps w-w. This is a limited competition product, and we expect DRRD to record ~$10 mn+ in annualised sales from the product over time.

Losartan market share: On losartan tabs, there has been a churn in market share. Aurobindo Pharma market share is at 40.8% (down 160bps q-o-q), down from a peak of 66% in May’19. Torrent Pharma is gaining share and is now at 19%, up from its recent low of 10%. Torrent Pharma at the peak enjoyed market share of 25-26% before impurity-related issues impacted supplies. Cadila has also gained a significant market share at 15%.

Rozerem market share: In Rozerem ($100mn) which is a three-generic-player market, Cadila has gained 39% market share. We think the price erosion is significant, and revenue for DRRD at 10% market share will be limited. We note that DRRD valued the asset at $34mn when it was acquired from Teva. High price erosion and low market share gains could lead to a potential write-off of the intangible, in our view.

Levothyroxine market share: In levothyroxine, Lupin (LPC IN, Buy) has gained 3.8% market share and market share has been stable over the past 3-4 weeks. We think Lupin has achieved annualised sales of $24mn currently, and a further rampup in sales is likely, with approvals for additional RLDs (reference listed drugs) in due course.

Sensipar market share: Cipla had launched Sensipar in Mar’19. The company has recorded sales of ~$40mn/ quarter over the past two quarters as competition was limited. However, competitive intensity has increased (with 8 generics in the market) that would have led to significantly lower pricing. Cipla’s market share has now ramped up to 32%. Given the market share gain, Cipla is likely to retain sales of $15-20mn/year, in our view.

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