Ranbaxy has informed the stock exchanges that the USFDA has revoked tentative approvals granted for generic versions of two drugs - AstraZeneca's heartburn drug Nexium & Roche's antiviral drug Valcyte.
Ranbaxy has first-to-file status, meaning eligibility for six months of generic sales exclusivity for both these drugs. However, the final approvals for these drugs were delayed because of the compliance issues at Ranbaxy's plants.
FDA has said that its original decisions granting tentative approvals were 'in error' because of the compliance status of the facilities referenced in the ANDAs at the time the tentative approvals were granted. As a consequence, in FDA's view, Ranbaxy has forfeited its eligibility for 180-day exclusivity for generic Valcyte.
The USFDA however, has not disclosed the reason for rescinding the tentative approvals. The agency told CNBC TV18 that FDA is prohibited by law from disclosing information about an unapproved application.
But does this mean all opportunities lost for Ranbaxy?
There are two parts to this.
Valcyte is a certainly a missed opportunity for Ranbaxy with the revocation of the tentative approval and a categoric mention of forfeiture of exclusivity. Valcyte is a USD 400 million drug, and analysts were anticipating Ranbaxy had an opportunity to earn USD 60-70 million in the exclusive sale period. This is now lost. It however means positive for other ANDA applicants like Dr Reddys Labs , Cipla, Endo, Aurobindo & Mylan, who have been waiting in line.
USFDA spokesperson told CNBC TV18 that this week ANDAs filed by Endo and Dr Reddys have been approved by the agency. This means Endo & Dr Reddys would be the first entrants, opening the US market for generic versions of valgancyclovir, a drug that lost patent protection in March 2014.
The second part of this story deals with the bigger opportunity of the USD 2.2 billion drug Nexium, which went off patent in May 2014. While tentative approval for this drug granted to Ranbaxy has being rescinded by the USFDA, the agency has not clarified if this exclusivity is also forfeited. This has opened a window of scepticism.
Some analysts say a revocation of temporary approval in turn means revocation of the exclusivity for Nexium as well. And if that is the case then, it will be big opportunity miss for Ranbaxy. It is anticipated that Ranbaxy could garner nearly USD 180 million in sales in the six months exclusivity period. These exclusive drug opportunities have been the pillar of hope for the troubled drug maker.
Remember, during the Q2 earnings call last month, Ranbaxy CEO Arun Sawhney had said that the company believes it retains exclusive rights to the launch of Nexium in the United States.
Ranbaxy, which is awaiting statutory approvals for a merger with country's biggest drug maker Sun Pharmaceuticals , has refrained from providing further clarity. The company just says it was disappointed with the development and was evaluating options to "preserve its rights."
However, some other analysts read it differently. They say the approval revocation, in Nexium's case, relates to procedural requirements.
Since, USFDA has banned Ranbaxy's only API facility at Toansa, the company has reportedly re-filed ANDA with a renewed API source for generic Nexium. Reports say that application is currently under review with the FDA.
HSBC Securities in a report said, "The tentative approval for old ANDA filing had anyway become immaterial and hence cancellation of that approval doesn't impact gNexium FTF status. In fact, we believe Ranbaxy is moving closer with approval of ANDA from new API source and hence remain positive on gNexium launch in few months."
But could that be a plausible explanation?
Four of Ranbaxy's Indian facilities have been banned by the USFDA. The company, in order to secure its opportunities, has in the past also sought for site transfers for other drugs. For example, atorvastatin and valsartan, among others. However, this is the first time that USFDA has sought to rescind a tentative approval, indicating a bigger issue at hand.
Interestingly, while not disclosing the reason for revocation of the approvals, the FDA in its statement to CNBC TV18 said, "In rare circumstances, FDA has rescinded a Tentative Approval."
Does Ranbaxy still hold exclusivity on Nexium? Could this mean there are more compliance issues at Ranbaxy's sites? Has the company been unsuccessful in seeking a site transfer for these drugs? Or more importantly, could the fine print at Consent Decree signed in 2012 be at play, one which demands more exclusivity forfeitures if remediation process is not satisfactory?
Shareholders would be keenly looking out for Ranbaxy to answers these questions.
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