Ranbaxy's Patent Litigations in the United States
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Case Code: ECON015 Case Length: 14 Pages Period: 1993-2005 Pub Date: 2006 Teaching Note: Not Available |
Price: Rs.300 Organization : Ranbaxy Laboratories Limited Industry : Pharmaceutical Countries : USA Themes: Corporate Social Responsibility |
Abstract Case Intro 1 Case Intro 2 Excerpts
"We take legal advice and respond appropriately. But we will not lose sleep over it [patent litigation]. It is something that one has to live with, if one has to do business in the US."
-D. S. Brar, CEO, Ranbaxy Laboratories Limited in 2002.
"It's a simple business philosophy. If you play enough of these, you will win some."
-Cameron Reid, President, Dr. Reddy's Laboratories Inc., US, in 2003 commenting on patent challenges to branded drugs.
"We will continue to defend against any and all patent challenges that seek to undermine our mission of finding new therapeutic innovations for the patients we serve."
-Hank McKinnell, Chairman and Chief Executive Officer, Pfizer Inc. after defeating Ranbaxy's patent challenge to Lipitor in the US on December 16, 2005.
Introduction
On December 16, 2005, the federal judge for the Delaware District Court in the US ruled that Ranbaxy Laboratories Limited's (Ranbaxy) proposed generic version of Lipitor (atorvastatin) infringed the patent rights of Pfizer; the court therefore disallowed Ranbaxy from launching its generic Lipitor in the US market. Soon after the ruling, Ranbaxy's share price took a beating on the Mumbai stock exchange. At the close of the trading on Monday, December 19, 2005, Ranbaxy's shares were trading at Rs. 367.35, down by 5.9 percent from the previous close and much lower than its 52-week high of Rs. 650.
It was not the first time that Ranbaxy had to face an adverse ruling in a patent challenge. Earlier in March 2005, Ranbaxy and Teva Pharmaceuticals USA Inc. (Teva) were ordered by the US District Court of New Jersey to immediately stop the marketing of generic Quinapril. When Ranbaxy and Teva appealed against the preliminary injunction, Pfizer, the original patent holder for Quinapril (marketed under the brand name of Accupril,) prevailed again in November 2005, when the Court of Appeals for the Federal Circuit upheld the preliminary injunction granted by the District Court against Ranbaxy and Teva.
Analysts felt that a victory against Pfizer over Lipitor would have given an enormous impetus to Ranbaxy in its growth plans as the drug sales would have helped it more than double its revenues in under a year. Ranbaxy's successful challenge to Glaxo Wellcome (Glaxo) and the launch of a generic version of Ceftin11 in 2002 had boosted the company to go ahead and challenge patents as a part of its expansion strategy in the US. Ranbaxy's successful launch of the generic version of Ceftin in 2002, helped increase its US revenues from $113 million in 2001 to $296 million in 2002. However, some analysts felt that Ranbaxy was getting too caught up in patent litigations in the US, where a single patent litigation can cost a company as much as $15 million or even more.
In January 2006, when Ranbaxy announced its annual results for 2005, the steep hike in R&D spending ($104 million, up from $75 million in 2004), pricing pressure in the US, (its biggest revenue contributor), the lack of new product launches, as well as, the high costs of patent litigation ($30 million) in the US and other European countries were all very well reflected, when it reported a whopping 62% fall in annual net profit (Refer Exhibit I).
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