Shaleen Agrawal

New Delhi: Ranbaxy Laboratories Ltd has reached an agreement with the UKbased drug maker AstraZeneca plc to exclusively sell for 180 days the generic version of Nexium, the ulcer-treating drug, in the US from May 27, 2014.

Currently, Nexium has annual sales of $5.2 billion in the US alone.

But five years before that, in 2009, Ranbaxy will start benefiting because it has signed an agreement to supply AstraZeneca, the active pharmaceutical ingredient or the drug itself, that is branded and sold as Nexium called esomeprazole magnesium.

Ranbaxy will also make the finished dosage form — meaning the packaged, ready to be consumed drug carrying the Astra Zeneca/Nexium label — from 2010 onwards.

Ranbaxy will produce up to 50% of the Nexium’s annual volume sales from 2010 under the agreement.

Revenues from the deal, thus, will start flowing from next year.

“The combined revenue potential for Ranbaxy out of the settlements reached with AstraZeneca is at $1.25-1.5 billion between now and 2014,” Ranbaxy’s managing director and chief executive officer Malvinder Singh told DNA Money.

“We have got a potential revenue upside every single year with these settlements,” he added.

But the bulk of the revenues will accrue only in 2014 when Ranbaxy launches the generic version of Nexium in the US with a 180-day exclusivity period, a company spokesperson said.

Considering the market potential for Nexium at about $5.2 billion, Ranbaxy can earn up to $900 million keeping in the account a 180-day sale period, 50% market share, and a 30%-40% price erosion, an industry source had told DNA Money earlier last month.

The combined market size of the two authorised generic drugs omeprazol and felopidine to be launched in 2008 and 2009 (not necessarily in this order) is $450 million per annum, a Ranbaxy spokesperson said.

The Indian company’s earnings, however, from the sale of these two drugs can be limited considering the overall generic drugs market share at 80%, Ranbaxy’s market share at about 30% of generics, and 50% price erosion on the launch of new generics, a research analyst said requesting anonymity.

Moreover, the analyst pegs the combined market potential of the two drugs at $200-235 million. Thus, Ranbaxy can earn $24-54 million from the combined sale of these two drugs in the US market.

Source : DNA