Natco Pharma, an Rs 440 crore turnover pharmaceutical company, has challenged the US patent on Tamiflu held by Gilead Sciences, and licensed to F. Hoffmann-La Roche in 1996. Both Natco and Gilead announced this in separate statements. Natco said that the FDA has accepted its abbreviated new drug application (ANDA) for generic Tamiflu or oseltamivir phosphate.
Roche’s 2010 filings show Tamiflu’s sales at about CHF873 million or about Rs 4,150 crore, but is down by 73% over last year, due to lower sales volumes. The drug peaked when the swine flu scare was its peak and governments across the world were adding to their stockpiles to deal with any epidemic breakouts. But Natco’s addressable market from the current filing, is in the US where sales were about CHF243 million or about Rs 1,160 crore, down by 72%.
Natco has tied up with Alvogen IPCO Sarl for marketing the drug in the US market. According to interviews of the company management on the CNBC TV18 news channel, the litigation costs will be borne by Alvogen, in return for rights to market the drug.
This is a key factor, considering the manner in which Para IV patent challenges proceed. The US FDA has notified Gilead of Natco’s challenge to its patent. Gilead in turn has 45 days from this notice letter to go to court to protect its patent, by filing an infringement suit against Natco. In any case, if litigation is unresolved beyond 30 months, the FDA can allow Natco to launch the drug even when litigation is pending.
This is known as an at-risk launch, and if Natco eventually loses the case, it will have to turn over the profits from the sale during this period and a penalty to the innovator company or the license holder. Another outcome could be a settlement between both companies. The earliest patent expiry for Tamiflu is in end 2016.
Natco has taken only the first step in what can be a very long drawn process, with an uncertain outcome. The risks to it from litigation appear low, as Alvogen is expected to bear the costs. If it wins the case, it will be the only generic player in the market for 6 months, along with Tamiflu. That will net a windfall for it, since price erosion is minimal during this period.
Since Alvogen is bearing the litigation costs, it is likely to get a significant share of the revenues from sales of the drug.
That may limit the extent of the windfall but considering Natco’s sales of Rs 440 crore and net profit of Rs 49 crore in fiscal 2010, success will mean a substantial hike in both sales and profits. Natco had earlied announced another first-to-file status on generic Revlimid or lenalidomide, a cancer drug with global revenues of $2.3 billion or about Rs 10,000 crore. This is in partnership with Watson Pharmaceuticals Inc.
Tumbling stock prices appear to be influencing Natco’s price movement, than the current news. It is also planning to raise additional resources through an equity issue, which too may be a dampener. Investors appear to be unwilling to factor the impact of an event, whose outcome may be known after months if not years. The company’s share was down by about 6%, at Rs 240, at the time of posting and has fallen substantially after hitting a 52-week high of Rs 358 in December 2010.