Ranbaxy's Patent Litigations in the United States

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Case Details:

Case Code : ECON015
Case Length : 14 Pages
Period : 1993-2005
Pub Date : 2006
Teaching Note :Not Available
Organization : Ranbaxy Laboratories Limited
Industry : Pharmaceutical
Countries : USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

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)¹⁰ 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).

Background

Ranbaxy was established in 1937, in Amritsar, Punjab, India, by Ranjit Singh and Dr. Gurbax Singh, who were the distributors of vitamins and anti-tuberculosis drugs for a Japanese pharmaceutical company. In 1951, Ranbaxy took on distribution for an Italian pharmaceutical company – Lapetit. Bhai Mohan Singh, a trader, joined the company as a partner at this point. Ranbaxy established its first manufacturing plant, in 1961, with assistance from Lapetit. In 1966, Lapetit decided to break the joint venture with Ranbaxy owing to business differences and Ranbaxy started to replace all of Lapetit's brands, by developing its own...

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10] Glaxo, currently known as GlaxoSmithKline, was the second largest pharmaceutical company in the world with more than $31 billion sales in 2004. Glaxo had undergone various mergers and acquisitions with various companies. Prior to being called with its current name, it was called as Glaxo Wellcome. In 2000, Glaxo Wellcome went for a merger with SmithKlineBeecham, another pharmaceutical company and the merged entity came to be called as GlaxoSmithKline.

11] Ceftin is Glaxo's brand of Cefuroxime Axetil, a cephalosporin. It is an anti-infective (antibiotic) used in indications like respiratory infections.