Peace on patents to boost Ranbaxy

Ranbaxy Laboratories, India's largest pharmaceutical drug firm by sales, expects its recent patent litigation settlements to add significantly to its revenues as well as net profit. The numbers could run into billions of dollars, sources familiar with the company's strategy said.

The company, in the midst of being acquired for $4.6 billion by Daiichi Sankyo, had filed 19 patent challenges in the US, but has settled five of these in the last two years. (See table.)

• India's top 10 pharma companies

Ranbaxy expects the settlement with Astrazeneca on Nexium, the world's second largest selling drug with annual global sales of around $5.5 billion, to fetch $1.5 billion in exclusive sale of its generic version and supply of raw materials. The out of court settlement with Pfizer on Lipitor is expected to generate even more revenues in the coming years.

By doing out of court settlements, Ranbaxy has opened multiple revenue streams from these products. Apart from generic clones, it can supply authorized generics as well as bulk drugs to some of these innovator companies.

Settlement of patent litigations, said the source, has brought certainty to the company's cash flows, besides saving it millions of dollars in legal fees. Ranbaxy still has 14 patent challenges going on at the moment. However, the source said, it may not settle all of these out of court.

"The company is open to settlement opportunities and will consider these on a case-to-case basis," the source said, adding: "Our objective is to gain an early entry for our generic products, provide certainty of launch, make available affordable drugs and maximize shareholder value."

The Ranbaxy share price has climbed steadily ever since it started doing out of court settlement of its patent litigations. Investment analysts as well as shareholders have given their thumbs up to the company's policy of de-risking its business.