Ranbaxy shares jump on approval of generic drug Diovan

MUMBAI: Shares of Ranbaxy Laboratories zoomed on Friday on news that the company has received US approval and a 180-day period exclusivity to sell a generic version of Diovan, the blockbuster blood-pressure drug of Swiss drug maker Novartis, after two years of its patent expiry.

Ranbaxy was supposed to launch its version of the pill in September 2012.

However, a ban imposed on its Toansa and Mohali plants by the US Food and Drug Administration over some manufacturing issues stopped the company from importing the drug to the US.

The Diovan copycat will now be manufactured at Ranbaxy’s US facility at Ohm Labs. During the 180-day exclusivity period – which is given to the first successful generic challenger of a patented drug – Ranbaxy will be the only generic company to sell the drug.

Diovan has annual sales of $1 billion, the benchmark to get the blockbuster tag. Ranbaxy should be able to generate $190 million of sales and an after-tax profit of $100 million during 180 days of exclusivity, said Hitesh Mahida, a research analyst at brokerage firm Antique Stock broking.

The news sent Ranbaxy’s shares gaining as much as 6%, before closing the day’s trading at Rs 497, up 5%.

Diovan’s approval would be a shot in the arm for Ranbaxy’s new owners, Sun Pharmaceutical Industries, which bought the company from Japanese drug maker Diiachi Sankyo in March.

Ranbaxy which was under severe regulatory stress because of its manufacturing trouble from the US drug authorities, was sold to Sun for $3.2 billion, making the latter the largest drug maker in India, and the fifth largest globally.

The approval for Diovan hints at a possible resolution between the FDA and Ranbaxy. The company’s India units are still banned to sell drugs in the US, which is one of the biggest markets for generic drug makers. Sun had stressed that its first priority will be resolving the manufacturing issues raised by the FDA.