FRENCH drugmaker Sanofi-Aventis settled its patent row in the US over colon cancer drug Eloxatin with several generic companies, but made no mention of Indian drugmaker Sun Pharmaceutical Industries that also sells the drug.
Under patents, innovator companies get certain periods of exclusive marketing of drugs at a premium price. However, generic companies can challenge the patents. Since their production cost doesn’t include research and development expenses, typically products from a generic company are 60-90% cheaper than the innovator.
Generic companies Teva Pharmaceuticals, Fresenius Kabi, and Sandoz have agreed not to sell the drug between June 30, 2010 and August 9, 2012. Sun Pharmaceuticals and Hospira Inc. are among those who market generic versions of the drug, but have not signed a settlement yet.
Sanofi-Aventis did not disclose other terms of the settlement. However, industry analysts said innovator companies often offer to share profits with generic challengers in exchange for retaining the exclusive period.
"A generic drug erodes the entire market value of the drug. This way Sanofi will make a much higher margin and control the market,” said an analyst with a domestic brokerage, who asked not to be named.
Over the next three years, drugs with sales of $90 billion are expected to become offpatent, but once the generic versions are launched the market will shrink to $10-15 billion because to lower pricing of products and competition.
That said, the acceptance of generic versions is increasing in the US as the recently passed Health Bill seeks to lower cost of healthcare. “Sun may not have signed because there is more hope that the court will let it market the drug, particularly if other generic players have pulled out of it,” said the analyst. This could be great news for Sun Pharmaceutical, because it may increase the price of the product and increase its margins on the business, pharma analysts said.
“We expect this drug to contribute $63 million revenue to Sun in FY11 (financial year that started Apr. 1),” said Sarabjit Kour, vice president research, Angel Broking. It is likely to add Rs 21 to Sun’s shares in this financial year, she added.
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