PFE figures to generate ~$5B in incremental revenue from the settlement (assuming that the ‘893 patent was the only one that would’ve held up). Since the incremental revenue is mostly in the US, the settlement will assure that PFE has sufficient US funds to pay the outsized dividend (#msg-29765590) without repatriating cash from its foreign subsidiaries.
[Unlike the botched story in #msg-30092736, this newswire appreciates that the ‘893 patent is the one of consequence and hence the settlement delays a generic launch by 20 months. Ranbaxy is trading lower today because: i) investors think the settlement terms were in PFE’s favor; and ii) the settlement ends speculation that PFE was planning a counter bid to buy out Ranbaxy on better terms than the ones offered by Daiichi Sankyo.]
NEW DELHI (Reuters) - Shares in Indian drugmaker Ranbaxy Laboratories Ltd (RANB.BO) fell nearly 7 percent on Thursday morning, after a patent dispute settlement with Pfizer Inc (PFE) was seen as offering no near-term benefit.
Brokerages said the settlement also lowered the chances of the U.S. drugmaker making a counter bid for Ranbaxy, India's top drugmaker by sales that has agreed to a friendly takeover by Japan's Daiichi Sankyo in a deal worth up to $4.6 billion.
On Wednesday, Pfizer said Ranbaxy can start selling a U.S. generic form of its cholesterol drug Lipitor by late 2011, months later than Wall Street expectations.
"Lipitor deal (is) a dampener," CLSA analysts said in a note. "We believe that Ranbaxy's settlement of Lipitor gives Pfizer a lot in terms of profits as it delays the generic entry by 20 months, yet denies Ranbaxy any incremental benefit."
Ranbaxy's founding Singh family agreed this month to sell its 34.8 percent stake to Daiichi Sankyo, Japan's No. 3 drugmaker, which would also buy up to 20 percent more from other shareholders.
Last week, India's Business Standard newspaper said Pfizer may counter Daiichi's offer and bid for about 65 percent held by institutions and public shareholders. Pfizer has declined to comment on the speculation.
The patent settlement diminishes the prospect for a counter bid, analysts at Credit Suisse said.
"This deal should also end all speculation over Pfizer making a potential bid for Ranbaxy; we always thought it was unlikely, but there were some in the market who thought it was likely," the brokerage said in a note.
It also said the Lipitor settlement terms were negative for Ranbaxy.
"Lipitor sales are falling in the U.S., so a delay reduces the market; 20-month delay reduces the present value of opportunity," analysts Neelkanth Mishra, Anubhav Aggarwal and Vikramaditya Narendra said in the note.
"Given Ranbaxy's relatively strong position on Lipitor and the deeper pockets of Daiichi, we are surprised by the settlement as there appears to be no near-term upside for Ranbaxy," said JP Morgan, who has a 553 rupees price target for the stock by October, 7.6 percent lower than its Wednesday close.
Daiichi Sankyo said earlier this week its open offer to buy up to 20 percent at 737 rupees a share would start on August 8 and that the last date for a competitive bid for Ranbaxy was July 7.
CLSA analysts said the stock was "fairly valued" and was likely to remain rangebound until the open offer.
Ranbaxy shares have fallen nearly 33 percent so far in 2008, underperforming the broader market which has lost a quarter of its value. <<
Let’s talk biotech! “The efficient-market hypothesis may be the foremost piece of B.S. ever promulgated in any area of human knowledge!”
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