AstraZeneca set for earnings boost if Ranbaxy can't deliver a Nexium generic

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AstraZeneca may get lucky with Nexium. That's thanks to the embattled Ranbaxy Laboratories, the Indian generics maker that could launch a copycat version May 27. The FDA cracked down on another of its plants earlier this year, and now Ranbaxy is scrambling around for a supply of Nexium's active ingredient. If it can't land the API, then AstraZeneca ($AZN) can hang on to its U.S. monopoly.

Any delay in Ranbaxy's launch would be good news for the U.K.-based drugmaker, which has been bracing for the hit from Nexium generics. To get an idea of how good that news would be, just look at Novartis ($NVS), which had expected a generic version of Diovan, its blood pressure drug, in September 2012. Ranbaxy owned the rights for a first launch of Diovan, just as it does with Nexium. And though Diovan HCT, a combo pill, made its debut, Ranbaxy's generic copy of Diovan itself has yet to appear.

Novartis' sales of Diovan and Diovan HCT came in at $3.5 billion last year. That's down 20% year over year, but a lot higher than Novartis had expected. For AstraZeneca, Nexium is even more important. The drug is among AstraZeneca's top sellers, with $3.87 billion in 2013 sales, $2.12 billion of that in the U.S. That's about 21% of its sales in the region.

In fact, Reuters says, Barclays analysts see a 10-cent boost to AstraZeneca's 2014 earnings per share with each month of a generic delay. The company currently expects a year-over-year decline in core EPS somewhere in the teens; for 2013, core earnings came in at $5.05 per share.

Reuters sources say Ranbaxy is negotiating with a couple of potential suppliers. The company has plenty of incentive, as Panmure Gordon analyst Savvas Neophytou told the news service: "It's one of the biggest generic opportunities ever. If I was Ranbaxy, I would be looking very hard to find a commercial solution."

But even if Ranbaxy finds a new supplier, the generic could still be delayed. According to at least one analyst, Ranbaxy would have to file a new FDA application built on the new source of active ingredient.

Meanwhile, AstraZeneca has itself made changes to its Nexium API supply--for the exact same reason as Ranbaxy. The Indian drugmaker had been one of AZ's suppliers for the ingredient. After the FDA barred drugs from Ranbaxy's Toansa plant earlier this year, AstraZeneca switched to a French company, which previously produced only part of the supply.

- read the Reuters news

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