Biotech Values

[DewDiligence]

WPI Anticipates Lipitor Bonanza

[Due to a quirk in Hatch-Waxman regulations, the inability by first-filer, Ranbaxy to get its generic Lipitor in order could give WPI windfall sales and profits as the sole distributor of PFE’a authorized generic.]

http://online.wsj.com/article/SB10001424052748704803604576078112992918964.html

›Watson Pharma Hopes to Be Sole Supply of Generic Lipitor

JANUARY 12, 2011, 2:47 P.M. ET
By THOMAS GRYTA

SAN FRANCISCO—Watson Pharmaceuticals Inc. will begin selling a generic version of Pfizer Inc.'s blockbuster heart drug Lipitor in November and hopes to find itself alone in that lucrative market.

While Pfizer has granted Watson the right to sell an authorized generic version of Lipitor, Ranbaxy Laboratories Ltd. has the right to sell its generic with 180 days of exclusivity at the same time, according to a lawsuit settlement with Pfizer.

Under federal law, the first successful generic challenger is awarded that exclusivity period from when it launches, but regulatory and manufacturing issues at the Indian company may delay an approval. If that occurred, other generic companies would be blocked from selling a generic version of Lipitor until Ranbaxy's exclusivity expired, leaving Watson as the sole generic.

"There is no question it would be huge," Watson Chief Executive Paul Bisaro said in an interview at the JPMorgan health-care conference in San Francisco. The result would cause revenue and profitability to spike, leaving the company with a "boatload of cash," he said.

The original Lipitor is the top-selling prescription drug in the world, with $11.4 billion in global sales last year and $5.7 billion in the U.S. alone.

Ranbaxy has had multiple regulatory and manufacturing issues in the U.S. in recent years that have raised concerns over whether it would be able to launch generic versions of drugs like Lipitor on time.

Ranbaxy's U.S. sales have been suffering after the Food and Drug Administration banned the company in September 2008 from importing more than 30 generic drugs into the country because of violations of certain manufacturing practices at plants in India.

Officials from Ranbaxy weren't immediately available for comment.

Because Watson sets the price of the generic Lipitor, any delay from Ranbaxy would be a significant advantage. The company hasn't disclosed its arrangement with Pfizer, but the company will get between 10% and 50% of profits, Mr. Bisaro said.

Even if Ranbaxy is able to get the approval on time, Mr. Bisaro believes that uncertainty leading up to the decision may make Watson the preferable initial supplier of customers that are looking to make sure they can have access to generic Lipitor when it becomes available.

"It would probably be advantage for us because we have guaranteed supply," he said.

Credit Suisse recently projected generic Lipitor sales of $667 million in 2012 for Watson, compared to $2.8 billion in total revenue for the company in 2009.

On Wednesday, Watson reported preliminary 2010 results that were largely in line with Wall Street estimates. It expects adjusted earnings at the mid point of $3.37 to $3.45 on revenue of more than $3.5 billion. Analysts projected earnings of $3.41 a share on revenue of $3.52 billion.

Aside from Lipitor, Watson is expecting 2011 revenue to get a boost from an authorized generic of Johnson & Johnson's Concerta for attention-deficit disorder in May. That drug had $1.3 billion in 2009 sales.

Watson acquired the right to sell the authorized generic Lipitor by buying privately held Arrow Group in a $1.75 billion deal in 2009.

That deal also included a generic challenge to Celgene Inc.'s blockbuster blood cancer drug Revlimid. Arrow had a deal with Indian generic company Natco Pharma Ltd., which developed the drug, but Watson has filed the application with the FDA and is leading the patent challenge.

Mr. Bisaro expressed confidence in winning the challenge to Revlimid, which had global sales of $2.5 billion in 2010. Celgene has also expressed confidence in its legal strategy and defending its patents. The related legal battle will likely take years to conclude.

Notably, Natco was initially disclosed as the generic challenger to Revlimid and Watson's role wasn't publicly disclosed. Mr. Bisaro said the company intentionally didn't announce its involvement because it wanted Celgene to sue them in a different jurisdiction.‹