Shares of Ranbaxy Laboratories jumped by about 9 per cent, or 32.35 points, on Thursday on news that it had reached an agreement with GlaxoSmithKline (GSK) to end a US court case relating to GSK's $ 1.5 billion-a-year herpes drug Valtrex.
Ranbaxy had gone to court against GSK's patent on Valtrex with an aim of marketing by June 2009 a version of the drug going off-patent. However, GSK had contended that it wanted the patent to be honoured until the end of 2009.
As fallout of Thursday's decision, Ranbaxy could get contracts to supply the basic ingredient of Valtrex to GSK, said an industry expert on condition of anonymity. This could translate into milestone payments for the Indian company. However, no written agreement has been signed yet, industry sources said.
Ranbaxy sources could not be reached immediately for comment. The development is significant given that Ranbaxy has a declared focus on challenging patents in developed markets where it is currently fighting more than thirty different cases.
According to analysts, the decision works out to be beneficial for both companies. In early February 2007, Ranbaxy received a final approval from the US FDA to market and manufacture Valacyclovir Hydrochloride tablets. It would have launched its generic version by June 2009.
In the scenario that the court case came out in favour of Ranbaxy, they would have got the marketing rights by June 2009. However, GSK would have got the rights for launching an authorised generic, which would mean additional competition for Ranbaxy in the critical US market where margins are thin.
After Thursday's decision, Ranbaxy will only be able to launch the drug by end-2009. However, it would enjoy 180-day exclusivity as the first non-patented drug in the market, and GSK would not launch a competing authorised generic drug. GSK would enjoy full patent protection till the end of 2009, sources said.