labels: pharmaceuticals, ranbaxy, bayer
Ranbaxy closes $65 million Bayer dealnews
09 September 1999

Ranbaxy Laboratories and German pharmaceuticals major Bayer AG have signed a 20-year agreement for development and marketing of the Indian company's oral variant of the anti-infective drug ciprofloxacin. The deal will be effective from the date of filing of the patent.

The available dosage regimen for ciprofloxacin, a Bayer discovery, is 'BID' or twice-a-day for a 500 mg tablet, while Ranbaxy has developed an oral once-a-day dosage form that is expected to increase patient compliance and convenience.

The Indian company is transferring the product development and global marketing rights to the German giant for a fee of over $65 million dollars, of which, it has already received an upfront $10 million. The remaining amount will be received over a span of two years as the novel drug delivery system clears various development stages until it reaches commecialisation.

Ranbaxy will also receive royalties on sales up to 10 per cent, with the exact percentage varying with the patent and competitive situation in the individual countries in which the ciprofloxacin variant is marketed. If, for example, a rival product with similar features emerges in a particular market, then royalty percentage for Ranbaxy will be less than 10 per cent.

Though Bayer will undertake marketing activities in most countries, Ranbaxy has reserved marketing rights for India and the CIS countries. The agreement also envisages joint marketing efforts in some countries.

Bayer's effort will be to replace its existing product with the once-a-day dosage variant. This variant will give Bayer an edge in the market for this drug, which is going off-patent in September 2001 in Japan, and October 2002 in the US. In major European countries like France, UK, and Germany the patent for ciprofloxacin expires in August 2001.

Patent expiry usually leads to a 60-70 per cent crash in drug prices. Bayer wants to sustain its market share by offering the new variant at a competitive price that will still be higher than the generic variants, says a Mumbai-based market consultant.

Ciprofloxacin is a wide-spectrum antibiotic belonging to the fluoroquinolone class of drugs. The worldwide market for fluoroquinolones, estimated currently at $3.85 billion, is expected to grow 16 per cent. Ciprofloxacin is available in over 100 countries and is used to treat a wide range of hospital and community infections. Ciprofloxacin contributes nearly $1.4 billion to Bayer's overall sales of $30.5 billion.

Ciprofloxacin is the second largest molecule in the Indian market after amoxycillin. IMS Health data for 1998 estimate the ciprofloxacin market at Rs 385 crore and growth rate at 24 per cent. Ranbaxy's Cifran is the market leader, with Rs 60 crore sales, and a growth of 15.4 per cent over 1997 (as per IMS 1998), followed by Cipla's Ciplox (Rs 49 crore), Cadila Healthcare's Ciprobid (Rs 37 crore) and Alkem's Alcipro (Rs 31 crore).

The Ranbaxy-Bayer deal would induce companies already engaged in research to focus on this opportunity, and may attract those who have not started yet. According to Dilip Shah, a former Pfizer director who now runs the Vision Consulting Group, drug delivery research is comparatively cheaper and even a Rs 100-crore company can think of staking a claim because of the low level of investments needed. "The average cost, excluding registration, and clinical trials for developing a delivery system, would be in the range of Rs 2-5 crore," says Mr Shah.

According to industry experts, Indian companies can take two possible routes. One would be to target an off-patent product; develop a novel delivery system; and obtain a product patent. However, in case of drugs like antibiotics, where the inhibitory serum concentration is very important, companies can focus on novel dosage forms that would enhance patient compliance and at the same time qualify for exclusivity.

Indian pharmaceuticals companies that have started investing in this type of research include Cipla, J B Chemicals and Wockhardt.

also see : Details on Ranbaxy’s research efforts

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Ranbaxy closes $65 million Bayer deal