Monday, June 16, 2008 — GLOBAL IP STRATEGY, PHARMA, BIOTECH & CHEM IP STRATEGY

Is Lipitor driving Pfizer and Sankyo's Ranbaxy bidding?

by Duncan Bucknell

I've previously blogged about Lupin's successful development, patenting and sale of its Coversyl IP porfolio to Servier (see Pharmaceutical Lifecycle Management & IP acquisitions).

Here's another nice example of cashing-in on pharmaceutical developments from the generic side of the equation - instead of selling the IP in a product - sell the whole company.

Daiichi Sankyo has recently made a bid for Ranbaxy, and even more interestingly, Pfizer is also rumoured to be making a bid.  The interesting thing about the Pfizer bid is that they have been suing Rambaxy in the global Lipitor dispute. 

So, I wonder to what extent Ranbaxy's role in Lipitor has figured in its attractiveness to Pfizer?  The Lipitor patent monopoly disappears in 2010-2011, and a generic version which can be launched a suitable period before patent expiry (as an authorized generic) will capture most of the generic market and make a big impact on maintaing Pfizer's market share in the product.

Current annual global sales of Lipitor are about $13 Billion and Pfizer iwould presumably have to bid more than Sankyo Daichi's $ 4.6 Billion.

So, let's assume that on generic entry, the global price for Lipitor drops by 50%.  That's a market of $6.5 Billion in annual global sales. 

If by launching before patent expiry with a Rambaxy-made generic, Pfizer can hold on to even 30% market share in the first year, then they will have paid for the entire purchase of Rambaxy within 5 years - from Lipitor sales alone (assuming a lowly 50% profit margin on Lipitor sales).    (There will be  some potential profit loss due to canabilisation of the market by the generic version, but I think this is covered by the low profit margin I've used.)

And that's just Lipitor - Rambaxy obviously have a lot more products on pharmacy shelves and in the pipeline (including a number of completely new chemical entities).

Sounds like a good idea to me - from Pfizer's perspective.

There are mixed views from Ranbaxy's perspective.

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