For Ranbaxy, Absorica is a low risk-high margin drug with limited competition. For example it generated USD 25 million of sales in Q2, it enjoys 14 percent market share and has at least 70 percent EBITDA margins since it is a branded drug. According to analysts this was the only positive Ranbaxy saw in its US business since its launch in late 2012 with estimated peak sales of USD 160 million by CY15. Absorbica is protected by 2 patents that expire in 2021 and Ranbaxy’s 3 marketing years exclusivity expires in May 2015. Watson’s entry is expected by April 2016 after which earnings will get depleted for this drug since there will be an additional player in an already 4 player market. Not to mention litigation costs since Ranbaxy is most likely expected to sue Watson over the next 45 days which will see both the companies indulge in a patent litigation. This news won’t affect Ranbaxy’s CY13 numbers, but it is an incremental negative given that Absorica a key base business constituent now has to contend with increased competition in the future.
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