>RANBAXY: Ranbaxy’s generic Lipitor market share rose to 32.5%; gained share from Watson; Dr Reddy’s plans generic Lipitor launch (HSBC)

Ranbaxy’s Lipitor and Caduet total prescription shares grow close to one-third.
Recent data show that Ranbaxy’s generic Lipitor market share rose to 32.5% of total prescriptions in the week ending 23 December 2011 – the third week since the launch of Lipitor generics. Ranbaxy gained share from Watson, which is now in third place with a 29.6% share. Pfizer’s Lipitor maintains a 40% share. Watson still leads in new prescriptions, with a 35.6% share versus 25.5% for Ranbaxy. Ranbaxy’s market share in Caduet has increased to 31% versus 33.6% for Mylan and 35.4% for Pfizer.


Generic market share likely to settle at 62%.
The combined market share for generics (Ranbaxy and Watson) for the week ending 23 December 2011 is at 62.1% versus 62.2% for the week after and 59.2% for the week before. Pfizer has been able to protect the market share of its branded Lipitor through strategic tie-ups and by offering higher rebates.


Generic Lipitor likely to take market share from Simvastatin.
Observing trends in the entire statin market over the past year, we note that the recent entry of generic atorvastatin has taken share from Simvastatin (i.e., the generic version of Zocor). The combined Zocor  and Simvastatin share has fallen from a peak of 49.6% in May 2011 to 43.9% in December 2011. Lipitor + atorvastatin market share stands at 23.4%, slightly off the peak of c24% in the full immediate week after the launch of generic variants. Crestor has been stable with a 12.7% share of total prescriptions for most parts of the year.


Dr Reddy’s plans generic Lipitor launch. 
As per its settlement with Pfizer, Dr Reddy’s Labs (OW, TP INR1,950) is slated to enter the market in June 2012, along with Teva and Mylan. We expect over 90% price erosion with the entry of three more players. We expect the product to generate cUSD50m sales for Dr Reddy’s. Teva has tentative approval.


Maintain Neutral. 
We value Ranbaxy at 20x FY13 EPS of INR20 (a 10% premium to the five-year sector average), adding INR53 for para-IV opportunities. We maintain our Neutral rating, given the lack of a clear path to recover the base business after the consent decree. Upside risk includes earlier-than-expected base business recovery and better-than expected margins. Higher price erosion in generic Lipitor and a slower domestic recovery are downside risks.


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