Ranbaxy, Dr Reddy’s and other Indian drug makers, which earn a third of their earnings from selling products in the US, need higher drug approvals from the Food and Drug Administration (FDA) of that country in the next financial year to maintain 20 per cent sales growth.
The requirement comes at a time when the US, the world’s biggest drug market, is facing a slowdown and one of India's leading drug makers, Ranbaxy, is being investigated by US FDA for violating rules.
Sun Pharma, Glenmark and Dr Reddy's would require at least 12-14 approvals to meet a 20 per cent sales growth target in the US, a recent Credit Suisse report said. Ranbaxy and Lupin, which currently face regulatory issues with the US FDA, might find it tough to achieve this target, the report said.
The US market accounts for 20-30 per cent of revenues for major Indian pharmaceutical companies.
In the last three years, major Indian drug companies grew at over 20 per cent in the US market and in the nine months of 2008-09 posted an average growth of 22 per cent. IMS Health estimates that sales of generics will reach $75 billion over the next five-year period, with a compound annual market growth rate of 14-17 per cent.
According to Dr R B Smarta, Managing Director of Interlink Marketing Consultancy, future prospects for the generic business in the US will depend on judicious product selection with less competition and innovative marketing strategy.
Normally, the US FDA approves a marketing application for a generic drug a few months before patent expiry of the innovator's drug. A first to file applicant can exclusively sell its generic version for six months from the date of expiry, as per the US laws for generic drugs.
It is estimated that by the end of 2009 over 100 drugs, including 13 big formulations of companies such as GlaxoSmithKline, Pfizer, Novartis and Takeda, will lose patent protection.
In the year ended 2008, a few high-value drugs went off-patent. These drugs included Merck & Co's Fosamax (alendronate), Pfizer's Camptosar (irinotecan) and Wyeth's Effexor XR (venlafaxine).
Indian generic companies account for more than 40 per cent of marketing applications in the US. "Drug companies with a good product pipeline in the US and Europe will not suffer in near or long-term future. Business and future prospects for them will depend on the products they choose," said Hitesh Gajaria, Executive Director, KPMG India.
| AMERICAN DREAMS Sun, Dr. Reddy’s and Glenmark can post >20% FY10 growth | ||||||
| Pending ANDAs | Approved ANDAs | Sales for 20% growth | Approvals required* | FY08 Approval | 9M09 Approval | |
| Sun | 103 | 67 | 40 | 12 | 19 | 14 |
| Lupin | 45 | 30 | 47 | 14 | 8 | 2 |
| Glenmark | 40 | 38 | 34 | 10 | 15 | 10 |
| Dr. Reddy's | 69 | 64 | 48 | 14 | 13 | 10 |
| Ranbaxy | 98 | 141 | 71 | 20 | 11 | 3 |
| Source: Company data, Credit Suisse estimates, *assuming $3.5mn sales per ANDA | ||||||
The biggest challenge to achieve the growth target is for Ranbaxy, Lupin and Dr Reddy’s as they would require higher approvals from the US FDA. Comparatively, Sun Pharma and Glenmark may need lower drug approvals.
Assuming that each abbreviated new drug application (ANDA) fetched an additional $3.5-million revenue, Ranbaxy would require 20 more approvals to meet the 20 per cent growth target, the Credit Suisse report said.
In 2007-08, Ranbaxy had just 11 drug approvals and got only three clearances in the first nine months of 2008-09.
Last year, regulatory issues at two of its manufacturing facilities in India forced Ranbaxy to withdraw about 30 drugs from the US market. The US drug regulator is yet to clear products manufactured from these two facilities.
Ranbaxy has the largest basket of products in the US market with 141 approved drugs and another 98 marketing applications pending for approval.
Dr Reddy's had 13 ANDA approvals in 2007-08 and 10 clearances in the nine months of 2008-09. The company may require 14 more approvals to reach its 20 per cent sales growth target. However, the US accounts for only 16 per cent of Dr Reddy's total sales, whereas the same is 24 per cent for Sun Pharma, 27 per cent for Lupin and 23 per cent for Ranbaxy. Dr Reddy's has close to 70 applications pending for approval in the US.
Lupin, which got eight approvals in 2007-08 and two in the first nine months of 2008-09, might require 14 more approvals to maintain a growth rate of more than 20 per cent, the Credit Suisse report said. Lupin's antibiotic Suprax was one of the fastest growing generic drug brand in the US market.
Sun Pharma, which got 19 approvals in 2007-08 and 14 more in the first nine months of 2008-09, requires only a dozen approvals to maintain over 20 per cent growth. But Sun's US subsidiary Caraco did not fare well in the last quarter mainly due to the slowdown in the US market and regulatory issues facing one of its facilities.
Similarly, Glenmark requires only 10 more approvals. The company had got 13 approvals in 2007-08 and 10 more in the first nine months of 2008-09.
