Replies to post #101421 on Biotech Values

[mcbio]

Re: generic Lovenox pricing

Neither SNY nor Sandoz gain by a price war. To engage in one is irrational. They cannot legally collude. But they both can compete until there is an equilibrium dictated by economic laws of profit maximization.

Suggesting that you'd have an all-out price war that requires irrational behavior is wrong.

It is not going to happen with two products.

IF you go back through the posts you will see that I argued that SNY would not offer an AG if ONLY mL was approved. I do not know any of the decision makers. My statement was an application of economic theory. So far, that appears to be correct.

I have also argued that in time a p/p duopoly* will split the market in two fairly equal parts by revenue. How long? By 1Q 2012 results. It would happen faster IMO if Sandoz were not starting out production constrained. How equal? Closer than 60/40.

IF mL stays the sole g for that time frame we can judge my prediction.

Anyone have an idea how long it will take Sandoz to ramp to 50% of units?


ij

* The closer this duopoly is to pure/perfect competition, the closer will be the split of revenue.

Perhaps I should have been a little clearer in my prior post because we do otherwise appear to agree on the major points you just posted. I didn't mean to suggest that SNY would actually cut their price below Sandoz and that Sandoz would follow suit and so on; I meant that if SNY did make the cut then Sandoz would obviously have to follow suit. Obviously it's not in either party's benefit to engage in a price war.

FWIW, I was also of the belief that in a duopoly SNY would not launch an authorized generic and I agree with your thoughts on general economic theory as it relates to what we ultimately may see for a revenue split of generic and branded Lovenox in a duopoly.

[jbog]

Zipjet,


Anyone have an idea how long it will take Sandoz to ramp to 50% of units


Without knowing if they need to simply add more throughput to approved existing facilities or if they are in need to build out new facilities no one would know the answer.

To add throughput is somewhat easy and quick whereas to add facilities would take two years at a minimum.



NVS would normally breakup their production areas from production and finish/fill as a normal policy. My best guess is they would now add new production at a different location so that they have an fallback operation.

I'd be surprised if they already didn't have some contractor (lonza, boehringer) already approved from the past.