Quick Bite – Pharma Sector - Compulsory Licensing - PINC Research

A Landmark Order

Natco Pharma (Natco) has won the Compulsory License (CL) to manufacture and sell generic version of Bayer's Nexavar used in the treatment of advanced stage liver and kidney cancer. Natco would price the drug at Rs8,800 per month (97% discount to the innovator price) and pay 6% royalty to Bayer under the CL. The Controller of Patent has granted CL to Natco based on all the three grounds 1) Nexavar drug demand was not met by Bayer 2) Nexavar was not manufactured in India in spite getting approval in 2005 3) Nexavar was not available at a reasonably affordable price. Further, the CL was issued in spite of the fact that Cipla had entered the market with a generic product priced at 89% discount to the innovator price. Natco expects to clock sales to the tune of Rs250-300mn from the opportunity. We expect the company to generate OPM of ~20% before any royalty payments.

While the order could be challenged by Bayer in the court of law, it paves the way for domestic pharma companies to go for CL of costlier drugs (primarily Oncology and ARV) in addition to launching the generic version of the product. On the other hand, from the innovator pharma companies' point of view, they could become more selective in launching and pricing of patented products in India.

Source : Equity Bulls

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