Dec 05, 2011, 03.32 PM IST | Source: Moneycontrol.com

PINC Research neutral on pharma space

PINC Research has come out with its monthly report on pharma sector. The research firm has maintained neutral view on the sector.

PINC Research neutral on pharma space

PINC Research has come out with its monthly report on pharma sector. The research firm has maintained neutral view on the sector.

Pfizer , Ranbaxy sued by 11 Pharmacies over Lipitor prices
Pfizer and Ranbaxy were sued by 11 California pharmacies over claims that they agreed to hold back generic version of the cholesterol-lowering drug Lipitor in the U.S. and then fixed its price. As per the lawsuit filed in the federal court in San Francisco, due to the agreement with Ranbaxy, Pfizer was able to make USD18bn by extending its time as the exclusive U.S. source of Lipitor. It also claimed that in exchange of this, Pfizer allegedly allowed Ranbaxy to distribute the generic of Lipitor earlier in foreign markets.

PINC Comments: As per Pfizer, the suit has no merit and the company is confident that the Lipitor patent settlement with Ranbaxy is appropriate. In the current context nothing can be inferred as there is no clarity on the facts of the suit until there is a concrete hearing in the court.

Dr Reddys seeks denotification of Special Economic Zone at Medak
Dr Reddys Laboratories (DRL) has requested the government to denotify its Special Economic Zone (SEZ) at Medak in Andhra Pradesh. The formulations unit, which was to come up at Medak, will now be moved to Visakhapatnam where the company has another SEZ for manufacturing APIs. As per the company, it has requested for denotification of entire SEZ (Medak) as it would be locating both the SEZs close together (at Visakhapatnam). The Company indicated that having an API unit at one place and formulation unit at another place complicates the whole matter. With regards to the proceedings, the company has given an undertaking to the Commerce Ministry for refunding the duty benefits availed of in the  name of SEZ and the Development Commissioner of VSEZ has recommended the proposal. DRL is setting up the formulations SEZ in Vizag for better synergies of management and material flows. In Vizag, it had acquired around 260 acres for the bulk drugs SEZ, which will now house the formulation SEZ as well. The company is expected to invest around USD200mn in both the SEZs. The SEZ land, after denotification, will be used for other expansion plans.

PINC Comments: The above move should help the company synchronize its manufacturing process across the value chain. The vacant Medak land could be used by the company for future expansions.

Raging Capital and Permian Investment partners oppose Sun Pharmas offer to acquire Taro
After the opposition from Grand Slam Asset Management, Raging Capital and Permian Investment Partners followed the league urging Taros board of directors and all minority shareholders to reject Sun Pharmas proposal and retain independent counsel to obtain an unbiased assessment of fair value. Raging Capital called on the Board to form a special committee composed of members who are truly independent from Sun Pharma and retain independent advisors to explore and evaluate all strategic alternatives to maximize shareholders value. Permian Investment Partners informed that it intends to fervently protect the value of its investment in Taro on behalf of its limited partners, in accordance with the fiduciary duties and will not part with the shares at a level that does not reflect fair value.

PINC Comments: There are three shareholders now who have opposed Sun Pharmas offer to acquire Taro. They have argued that Suns offer is at a substantial discount compared to other deals for US generic companies. Thereby, the flowing oppositions would now make it increasingly difficult for Sun Pharma to take full control of Taro at USD24.5/share. The deal was expected to contribute 3.9% to FY13E earnings.

Lupin sued in US for Lumigan patent infringement
Allergan sued Lupin for wanting to sell generic version of Bimatoprost Ophthalmic Solution (0.01%) which it sells in the name of Lumigan. Allergan has filed suit in Texas Eastern District Court after Lupin submitted an ANDA to the USFDA. Allergan believes that by submitting this application, Lupin committed an act of infringement of the 504 patent, which protects Lumigan till June 13, 2027. Allergan has estimated that Lumigan franchise product net sales would be between USD610-630mn in 2011. Lumigan is the first-line therapy indicated for reduction of elevated intra-ocular pressure in patients with open-angle glaucoma or ocular hypertension.

PINC Comments: Lupin has filed a Paragraph IV certification challenging that patent 504 (expiring in June 2027) is invalid or/and not infringed. Earlier in August 2011, Sandoz had also challenged patent 504. As a result, we expect Sandoz to be the sole FTF holder. However, this in-line with the companys strategy to focus on niche/limited competitive space (OC, Ophthalmic space).

Lupin acquires Irom Pharma in Japan
Lupin has acquired Irom Pharma (IP) in Japan. Established in 1947, IP is a specialty injectables company headquartered in Tokyo. For FY11, the company clocked sales of USD70mn (JPY5,361mn). IP has a significant presence in the Diagnosis Procedure Combination (DPC) hospital segments which are fixed-rate payment hospitals and treat acute conditions. DPC hospitals promote the use of generic drugs to cut costs. There are currently over 1,400 DPC hospitals in Japan, covering over 35% of all hospital beds nationwide and have a market size of USD11bn. Thus, generic injectable penetration is slated to grow significantly in future.

PINC Comments: Though Lupin has not provided any details on the acquisition cost, we expect the deal to be valued between 1-1.5x Price/Sales (USD 70-105mn). Lupin is expected to fund the deal through combination of debt and internal accruals. We estimate the acquisition to contribute ~4% to our FY13E sales and to be marginally EPS accretive. The acquisition now strengthens Lupins position in Japan and provides an entry into injectable space in the region. Japan is a second largest pharmaceutical market with total size of USD96bn and a generic penetration of mere 23% (volume terms). Japan region is now expected to contribute ~16% to Lupins FY13E sales (Kyowa 12% and IP 4%).

Glenmark receives USD5mn payment from Sanofi-Aventis
Glenmark Pharma (Glenmark) has received USD5mn milestone payment from Sanofi Aventis related to the successful completion of the Phase I clinical study of GRC 15300, a first-inclass TRPV3 inhibitor for treatment of pain. The above payment is part of the deal wherein Glenmark had out-licensed GRC-15300 to Sanofi Aventis and received upfront payment of USD20mn with a potential of total milestone reaching up to USD325mn with royalties on sales.

PINC Comments: The upside from the deal is in line with the expectations and signifies the R&D expertise of the company.

Glenmark enters cosmeceutical segment
Glenmark forays into the cosmeceutical segment in India with the launch of Canadian company Immanence-IDCs anti-ageing product line, through its newly formed division, Glenmark CosmoCare. IDC products are based on strong scientific foundation and Glenmark would offer the advanced cosmeceutical line to a wide network of cosmetologists and dermatologists across the country. Glenmark has entered into a ten-year agreement with Immanence-IDC to distribute the high-end dermatology products in eight countries - India, Brazil, Mexico, South Africa, Egypt, Vietnam, Malaysia and Thailand. It plans to roll out the range in most of these markets by end of FY12. The other financial details are not disclosed.

PINC Comments: The foray of Glenmark into cosmeceuticals will significantly enhance Glenmarks dermatology product offerings and further consolidate its leadership position in the segment. It should be a long term positive for the company.

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