Like Novartis before it, AstraZeneca benefits big time from Ranbaxy issues

Ranbaxy Laboratories in June finally managed to finesse its regulatory problems enough to get a generic of Novartis' ($NVS) Diovan to market, boosting its own fortunes while depriving the Swiss drugmaker of the extra revenues it enjoyed for nearly two years. Next up is a generic of AstraZeneca ($AZN) blockbuster Nexium. The question remains when.

Nexium, which sold $2.2 billion in the U.S. last year and $1.9 billion in the first half of this year, went off patent in May. But a ban the FDA placed on a Ranbaxy plant in India because of questions over quality, has kept it from launching its generic of the heartburn fighter.

Ranbaxy's CEO insisted to analysts Tuesday that his company retains the 180-day exclusive rights to a generic of the heart drug but was less firm on when it might launch, Reuters reports.

"We believe we have the [Nexium] exclusivity and we will launch the product upon approval," Arun Sawhney, said after Ranbaxy released an earnings report in which sales of the Diovan generic in the U.S. returned it to profitability for the last quarter. When pushed by analysts about the status, Reuters reports he refused to provide details.

Connecticut Attorney General George Jepsen in a citizen's petition to the FDA last month argued the agency should take away the 180-day exclusivity Ranbaxy enjoys for Nexium if a generic can't be approved promptly, Medical Marketing & Media reports.

"The manifest result of this inaction is higher prices and a dead-stop bottleneck preventing more than a half-dozen generic drug manufacturers lined up behind Ranbaxy from entering the market. And there is no end to the delay in sight unless the FDA acts – which it has clear authority to do," Jepsen argued, MM&M reports.

That same argument was unsuccessfully made in federal court in the case of a delayed Diovan after its patent lapsed in September 2012 and FDA concerns kept Ranbaxy from initially launching a generic. The ongoing delays allowed Novartis last year to raise its earnings projections. Ranbaxy finally managed to get its Ohm Laboratories plant New Jersey approved to make the drug, using an active ingredient from a supplier. The company is reportedly trying the same workaround for generic Nexium but has yet to get it approved.

According to financial filings, AstraZeneca planned for a Nexium generic to hit October 1, so for now, it continues to reap the benefits of Ranbaxy's problems while consumers continue to pay higher prices. The delay is a big deal for the U.K.-based company. Earlier it predicted a double-digit percentage drop in core earnings per share for 2014, with revenue sliding by a percentage in the low- to mid-single digits, if the generic launched in May. AstraZeneca reports Q3 earnings next week, so just how great a benefit the delay has provided will be clearer then.

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