Avon gains on US OK for Ranbaxy’s valacyclovir

02-Dec-2009 - Last updated on 02-Dec-2009 at 13:06 GMT

Indian API maker Avon Organics’ share price rocketed 10 per cent on the Bombay exchange yesterday after the US launch of a generic herpes treatment by Ranbaxy Laboratories.

The drug, a version of GlaxoSmithKline’s (GSK) Valtrex, is expected to generate 10bn rupees (€143m) a year in the US. Sales in this range would be good news for Avon, which supplies Ranbaxy with valacyclovir, the new product's active pharmaceutical ingredient (API).

Hyderabad-based Avon, whihc is majority-owned by Arch PharmaLabs, makes the compound at its US Food and Drug Administration (FDA) approved facility in Solapur in Maharashtra State which, prior to the deal, focused on the production of pseudoephedrine.

Arch’s chairman, Ajit Kamath, told in-PharmaTechnologist the Ranbaxy supply contract: “will substantially impact both the revenues and earnings of Avon and also improve the profile of the site from a single product site to multiple products.

While Kamath could not disclose how much API Avon will supply, a report in India’s Business Standard suggested that Ranbaxy will need seven tonnes a month and that it currently produces only a fraction of this itself at its plant in Toansa in Punjab.

Kamath also said that: “The fact that Avon could enable Ranbaxy's first to file initiative also helped tremendously to improve the perception of Avon and Arch as a group.”

The importance of Ranbaxy being first to file was also stressed by Angel Broking analyst Sushant Dalmia.

Dalmia told the Wall Street Journal the “launch demonstrates Ranbaxy's ability to protect its first-to-file opportunities, despite facing FDA action and has raised confidence it will be able to do so again in future.

"Valtrex is expected to contribute $200 million to sales and $80 million to [Ranbaxy’s] bottom line during the six months of exclusivity. “

Ranbaxy in the US

For Ranbaxy and Japanese owner DaiiChi Sankyo, approval for the drug is also good news as it will undoubtedly help wider efforts to rebuild the Indian firm’s presence and reputation in the US market.

Although Ranbaxy is still not permitted to produce drugs for the US market at its key facilities in Dewas and Paonta Sahib, possibly part of the reason for its deal with Avon, the fact it is making some of the API for the new product itself can only help rebuild confidence.

According to the Business Standard, Ranbaxy’s Toansa plant received a clean bill of health from the FDA after a detailed inspection that took place earlier this week.