Avon to gain from nod to Ranbaxy's drug

The company will supply the main active pharmaceutical ingredient for Valtrex.

Ranbaxy Laboratories’ exclusive launch of generic anti-herpes Valtrex (valacyclovir hydrochloride) tablets in the US will help a listed Indian drug company, Hyderabad-based Avon Organics.

Avon is expected to get a large share of the Daiichi Sankyo-controlled Ranbaxy’s projected upside of close to Rs 1,000 crore from the sale of this drug. This is because it will supply the main active pharmaceutical ingredient (API). Ranbaxy has entered into a long-term supply contract with Avon, owned by the Rs 1,000-crore Arch Pharma Labs Ltd, for sourcing the API, sources told Business Standard.

Ranbaxy, which is yet to get its Dewas and Paonta Sahib facilities re-approved by the US Food and Drug Administration (FDA) after defects cited by the regulator, is planning to make finished formulations (tablets) of valacyclovir hydrochloride at its Ohm Laboratories in the US.

Share prices of Avon Organics rose close to 10 per cent yesterday in a tumbling stock market. The news of the launch of Valtrex also enthused investors of Ranbaxy, whose share price rose 3.26 per cent to Rs 444.05.

“On November 25, Ranbaxy Pharmaceuticals Inc (RPI), a wholly-owned subsidiary of Ranbaxy Laboratories Ltd, introduced valacyclovir hydrochloride, 500 mg and 1g tablets. RPI will market (the) product under the RPI label,” said Ranbaxy in response to an e-mail. It declined comment on its alliance with Avon Organics.

Ajit Kamath, managing director of Arch Pharma Labs, also declined comment. “We have several supply agreements with Indian and overseas drug makers and cannot comment on any of these as part of our business commitments,” he said. An e-mail sent to Arch Pharma Labs also did not elicit any response.

Ranbaxy will require five-seven tonnes of this API every month and is currently manufacturing only a part of this at its Toansa facility in Punjab, which was inspected by the FDA a few days ago. The inspection was important for Ranbaxy as it tries to get its US business back on track. The FDA had banned the company from selling in the US about 30 drugs manufactured at its Paonta Sahib and Dewas facilities.

Ranbaxy’s initial plan was to make the generic version of Valtrex ar Dewas, sources said. According to an out-of-court patent settlement with GSK, Ranbaxy was allowed to enter the US market in late 2009. In early February 2007, Ranbaxy received final approval from the FDA to market and manufacture valacyclovir hydrochloride tablets.

Ranbaxy enjoys first-to-file status for the drug and therefore has a six-month exclusive marketing right. During the period, Ranbaxy will be the only company, other than GSK, the innovator, to market the product in the US, as there are no authorised generics from GSK.

Sources said Avon Organics had already supplied a major share of the raw material required for the pilot batches of the product.

Private equity funds-backed Arch Pharma has a 63.60 per cent share in the Rs 125-crore Avon Organics, which has facilities in Solapur in Maharashtra and in Hyderabad. Arch had acquired Avon, then an ailing company, two years earlier.

In India, only a few drug makers have the capability to make valacyclovir hydrochloride APIs and these include Ranbaxy and Divi’s Laboratories, besides Avon Organics. Divi’s Laboratories was supplying the APIs for valacyclovir hydrochloride to GSK.

Sourcing arrangements with pure-play API makers are common among Indian generic companies. Often, companies leveraged each other’s strengths to push products in overseas markets, said industry analysts. For example, Ranbaxy has a strategic alliance with Chennai-based Orchid Chemicals & Pharmaceuticals to market many finished dosage formulations and bulk drugs in various geographies. Ranbaxy also had a long-term alliance to sell some of the tuberculosis drugs manufactured by its rival, Lupin Laboratories, in Africa.