Zydus Cadila gets USFDA approval for colitis drug; margins get a boost

Currently, it sells the authorised generic version of Asacol HD in the US

Ahmedabad-based pharmaceutical giant Cadila Healthcare (Zydus Cadila) has received the final approval from the US drug regulator for its Mesalamine delayed-release tablets that will be manufactured at the Group's formulation facility at Moraiya, which has recently come out from under the US Food and Drug Administration's (USFDA's) scanner. 

Generic Asacol HD has a market size of $400 million approximately and Cadila has approval for the 800 mg tablets. Brokerage firm Edelweiss said that Cadila has entered into a settlement agreement with the innovator (Warner Chilcott). Under the agreement, it is currently selling an authorised generic version (lower margin) of the drug. Currently, Cadila earns $100 million of revenue and $20 million Ebitda (earnings before interest, taxes, depreciation and amortisation) from the authorised generic version. There is no other generic approved for this product at the moment.

"We had a word with the management. They have, currently, not disclosed the launch date for the product. However, we believe that they may be able to launch this product only after the end of the lock-in period as per the settlement agreement. Launching its own ANDA (Abbreviated New Drug Application) will have around 80 per cent margins compared to around 20 per cent for an authorised generic version," said Deepak Malik, an analyst with Edelweiss.

Importantly, this development lends validation to Cadila Healthcare's other complex generic filings like anti-hyperstensive drug Toprol XL ($400 million market size), gastrointestinal drug Prevacid ODT ($250 million), and transdermals.

  

As such, the company is betting on its mesalamine-based filings. Zydus has three mesalamine-based filings — generic Asacol (it has now received approval for which), generic Delzicol, and generic Lialda. Of these, it has already bagged the approval for generic Lialda (which has sales of $1.14 billion in the US) and a launch is expected in the next quarter.  

At present, Cadila Healthcare is the ninth ranking pharma player in the US generics market (based on prescriptions) with a market share of 3.1 per cent. 

It draws 40 per cent of its revenues from the US market and aims to double its US base business, which stands at $553 million, over the next three years by launching around 100 products. 

The Moraiya facility contributes to around 60 per cent of Zydus' US sales. It was served a USFDA warning letter in December 2015 and received a clearance this June.

Since January 2017, the group has received 27 final and two tentative ANDA approvals from the USFDA. The group now has more than 130 approvals and has, so far, filed over 300 ANDAs since the commencement of the filing process in financial year 2003-04.