Ranbaxy settles patent dispute with Pfizer over Lipitor, other drugs

Earlier this year, Ranbaxy said it won the right to launch its own low-cost version of the world's largest selling drug from March 2010 when the US Patent and Trademark Office (USPTO) rejected Pfizer's appeal to re-issue patent for Lipitor.

Subsequently, market analysts claimed Pfizer might launch a hostile bid on Ranbaxy as it might not want it to fall into another drugmaker's hands. Though Daiichi had agreed with Ranbaxy that it would acquire the promoters' 34.8 percent stake and also launch an open offer for 20 percent more, rumors began spreading that Pfizer has a special interest in the non-promoter's stake.

This had greatly unnerved Daiichi, which was forced to announce that it would revise its open offer in the event of such an outcome (hostile bid).

However, the matter did not come to that stage as Ranbaxy entered into frantic negotiations with Pfizer on Wednesday, subsequently announcing that they have reached an out-of-court settlement over Lipitor and have ended their long and costly legal battle.

According to the terms of the settlement, Ranbaxy said, it would launch its generic version of Lipitor and Caduet (a Pfizer combination drug of Lipitor and hypertension drug Norvasc) not in 2010 but in November 2011 in the US market with exclusive marketing rights for 180 days. During this period, analysts claim, Ranbaxy stands to earn as much as $1-1.5 billion before other generic drugmakers such as Israel-based Teva enters the US market.

Though the settlement pushes back Ranbaxy's plan by 20 months, yet, it brings a certain amount of certainty to Ranabaxy's launch plan and also has saved it a considerable amount of litigation cost.

The settlement also makes Ranbaxy "risk free" as Daiichi, being an innovator drugmaker, was clearly not very keen on pursuing a legal battle with another innovator drugmaker Pfizer over Lipitor. The settlement with Pfizer also means Daiichi will not be facing any challenge from Pfizer over the acquisition of Ranbaxy.

Pfizer also gains from the deal as it will earn additional revenue of around $20 billion by selling Lipitor during the extended period. Besides, the settlement also allows Pfizer to pursue its own course of finding new drugs that would replace Lipitor.

According to Ranbaxy CEO Malvinder Mohan Singh, the settlement is applicable only within the US territory. "This is the largest and the most comprehensive out-of-court settlement ever in the pharmaceutical industry covering a total revenue of over $13 billion. It's a win-win situation for all. The revenues will start kicking in from this year as we will be launching generic version of Lipitor in Canada this calendar year," he said.