Ranbaxy announced Thursday that the company received final FDA approval for a generic version of Pfizer's Lipitor (atorvastatin) and has launched the product in the US. The regulator noted that the drug, which is the first generic version of Lipitor cleared by the agency, will be manufactured by US-based Ohm Laboratories. Shares in Ranbaxy jumped as much as 11 percent on the news.

The Indian drugmaker, which is majority owned by Daiichi Sankyo, said that under a deal with Teva, a portion of the profits from sales of the Lipitor generic during the first six months will be paid to the Israeli company.

Other terms of the agreement weren't disclosed. Meanwhile, Teva announced Thursday that US regulators granted tentative approval to its proposed generic version of the drug, which the company plans to begin selling in May when Ranbaxy’s exclusivity period ends.

On Wednesday, Watson Pharmaceuticals launched an authorised generic version of Lipitor. The product didn't require FDA clearance because Pfizer is providing the drug under an exclusive agreement with Watson in return for a share of revenue.

Analysts suggested that under the deal between Ranbaxy and Teva, the latter may market the drug as it has a stronger distribution network. "It looks like a marketing and distribution tie-up with Teva.

Ranbaxy will be able to fight off competition from Pfizer and Watson better and gain a higher market share with Teva," remarked Emkay Share & Stock Brokers analyst Deepak Malik. "So with this alliance if it is able to garner a 10 percent higher market share i.e. add $125 million more revenue and at the same time it shares 30 percent profits, it is still a win-win for both," Malik added.

IIFL analyst Bino Pathiparampil noted that the FDA approval was for products made at Ohm’s New Jersey plant, which may have been contingent on a deal with Teva. "It could well be that the Lipitor ingredients could come from Teva," Pathiparampil said, adding that in that scenario, "Ranbaxy will assemble the drug at their factory in New Jersey."

However, Kotak Institutional Securities analyst Priti Arora suggested that "there is something more in this deal than meets the eye." Arora noted that "my feeling is that they allied with Teva as a backup measure in case approval was held back due to its manufacturing issues."

In early November, Teva indicated that if it was able to introduce an "important undisclosed product" in the fourth quarter, it would meet the upper range of its forecast of earnings of $4.92 to $5.02 per share this year. At the time, Sanford C. Bernstein & Co. analysts said that the new product "is ostensibly Lipitor."

Analysts predict that the generic version of Lipitor may generate as much as $650 million for Ranbaxy in its first 180 days on the market.

After this time, generic versions from companies including Mylan and Dr. Reddy's are expected to reach the market, according to US court filings. "The market is simply relieved to hear that [Ranbaxy's] drug is approved," remarked SMBC Nikko Securities analyst Yasuhiro Nakazawa.

However, Arora explained that producing generic Lipitor in the US instead of India will reduce the amount of profit Ranbaxy makes on each dollar of sales. "Margins for manufacturing in…India are around 60 percent compared to about 40 percent from the US," the analyst added.

Arora had forecast that Ranbaxy would generate $560 million in sales from the product during the six months of exclusivity, but said "we will have to revise our estimates because of this and the Teva deal."


(Ref: FDA, Financial Times, Bloomberg, NASDAQ, MarketWatch, Business Wire, Teva, The Wall Street Journal, livemint.com, CNBC, FinanzNachrichten, Daiichi Sankyo, Moneycontrol.com, Globes)