Friday, February 17, 2012

Guestimating Lipitor Numbers ahead of Ranbaxy 3Q Results


Teva at its 4Q-2011 earnings announced that it is receiving royalties on Lipitor sales from Ranbaxy. While the reported EPS ($1.59) was in the middle of the guided range ( $1.53 to $1.63). We believe the guidance range was to accommodate the potential earnings from Lipitor. 
At $1.59, the earnings from Lipitor equates to around $50m for Teva. Assuming a 10% royalty rate, the Lipitor sales would have been in the range of $500m, which would imply post tax profits of $200m for Ranbaxy.  We do not expect the royalties to be more than 10%, as it may not make sense for a generic company to share anything more than that.  In the best case the royalty may stretch upto 15% on sales