Is Lipitor driving Pfizer and Sankyo's Ranbaxy bidding?
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.