Thursday, April 21, 2011

Ranbaxy - Strong Volatility Ahead – US district court to shortly rule on Lipitor exclusivity

Recall last month, Mylan had sued FDA in the US district court seeking  a forfeiture of Ranbaxy’s 180 days exclusivity on Lipitor.  A hearing on the motions is scheduled for 28th April at 9:30 am (US Time).

The decision could go either way, and I expect a 10%  stock price movement either way depending on the outcome.  In such a case I would recommend a straddle on Ranbaxy as significant volatility in stock price is expected.   

Background of the case –
Mylan claim is that FDA has arbitrarily, unreasonably and unlawfully failed to decide whether it should reinforce the Application Integrity policy against the atorvastatin ANDA application submitted by Ranbaxy. According to the Complaint, "FDA found that Ranbaxy engaged in a pattern and practice of submitting to FDA drug applications containing false and unreliable data generated from Ranbaxy's Paonta Sahib, India manufacturing site, where, Ranbaxy markets its generic LIPITOR."  Mylan contends that "if FDA enforces the AIP against Ranbaxy's ANDA, then the plain language of the FDA Act and the AIP require FDA to deny Ranbaxy's ANDA, and terminate any period of 180-day marketing exclusivity originally provided to Ranbaxy

According to Mylan, Ranbaxy cannot market generic Lipitor before November 2011 (due to a settlement with Pfizer), meaning that if Ranbaxy has 180-day exclusivity, other generic makers could not enter the market until May 2012.  But in the absence of Ranbaxy's 180-day exclusivity, Mylan could launch its generic Lipitor as early as June of this year.  Mylan further states that "upon market entry of generic LIPITOR, it is estimated that U.S. consumers, the government, and third party payors could save between $10.9 million and $18.6 million per day, which equates to between $3.97 billion and $6.8 billion in potential savings per year."
FDA, in its motion to dismiss, responds that Mylan lacks standing, because it has not (yet) been injured; Mylan's claims are not ripe, because its own ANDA is not ready for approval; FDA's enforcement discretion is not subject to judicial review; and Mylan fails to state a claim for unreasonable delay under the Administrate Procedure Act