Torrent Settles With BMS For Revlimid, Launch Timeline Undisclosed
US Injectables Entry Under ‘Constant Evaluation’
Executive Summary
Torrent has reached a settlement with BMS’ Celgene over oncology blockbuster Revlimid, officials said during a Q2 call, but declined to disclose launch timelines for the generic. Meanwhile, the Indian company continues to evaluate an option to enter the injectables segment in the US as revenues slide.
Torrent Pharmaceuticals Ltd. has reached a settlement with Bristol Myers Squibb Company’s Celgene Corporation post a US lawsuit by the latter in the District of New Jersey in June for alleged infringement of patents on its blockbuster oncology drug Revlimid (lenalidomide).
During a post-earnings call, Torrent’s executive director for international business, Sanjay Gupta, revealed that the litigation had been settled but he was “not at the liberty to disclose what the terms of the settlement are.”
The suit was in response to a letter sent by Torrent notifying Celgene that it had submitted an abbreviated new drug application (ANDA) to the US Food and Drug Administration for generic lenalidomide, which is used to treat myelodysplastic syndrome and multiple myeloma, among other types of cancers.
While Gupta declined to provide a probable timeline for a launch, the development is significant given that Revlimid is the top-selling drug approved for multiple myeloma. According to PharmaVitae Analytics data available on Informa's Datamonitor Healthcare, Revlimid sales are forecast to peak at around $13.3bn in 2021, steadily declining thereafter to $7.8bn in 2026 and $6.8bn in 2028. (Also see "Multiple Myeloma: A Growth Market Set To Shrink As Revlimid Generics Hit" - Scrip, 11 Sep, 2018.)
Celgene has entered a string of settlements with other companies for the US market, most prominent being Natco Pharma Limited, which has a volume-limited license to sell generic lenalidomide in the country from March 2022 and an unlimited quantity beginning 31 January 2026. The company is eligible for 180 days of generic drug exclusivity for 5mg, 10mg, 15mg and 25mg lenalidomide capsules as the first ANDA applicant.
Other ANDA sponsors that have settled with Celgene include Alvogen, Inc., Dr. Reddy's Laboratories Ltd., Cipla Limited, Sun Pharmaceutical Industries Ltd., Zydus Cadila and Biocon, Ltd. (Also see "Dr Reddy’s Eyes Generic Revlimid Exclusivity With ANDA Approval" - Generics Bulletin, 19 Oct, 2021.)
The Orange Book currently lists a total of 15 patents protecting Revlimid capsules, the vast majority of which are method-of-use patents, with the latest expiring in March 2028. Two key drug substance patents – US patents 7,855,217 and 7,465,800 – expire in November 2024 and April 2027 respectively.
Examining US Injectables Entry
Meanwhile, Torrent saw its fiscal second quarter to September revenues in the US decline to INR2.84bn ($37.8m), a 13% fall over the previous quarter. Total revenues, however, grew 6% quarter-on-quarter and were flat over Q2 FY21 at INR21.4bn. (Also see "Generics Industry Fails To Match Last Year’s Growth In First Quarter" - Generics Bulletin, 16 Jul, 2021.)
Asked if the company, like several of its Indian peers, would consider launching injectables - which enjoy higher margins than oral solids - in the US, Gupta said the company doesn’t cater to hospitals anywhere in the world. “We make some choices and one of the choices is we don't do injectables right now for the US market. But those choices are constantly being evaluated.
“So I'm not saying we will not do injectables…there's a lot of pressure in the retail side, where there are only three or four customers which account for 90%. So, by adding a hospital chain we would be doubling the number of customers.”
Given the revenue potential and scope to diversify the company’s customer base, the management is now interested in the hospital segment and while it hasn’t “disclosed any products to do that….it is something which is under constant evaluation,” Gupta said.
FDA Inspection Update
A strategy realignment might be precipitated since Torrent’s Q2 FY22 US quarterly revenue is the lowest in the past five years, on account of a high price erosion for existing generics and a lack of new launches pending inspections by the US FDA.
Over the last few quarters, analysts have been repeatedly asking over the status of such inspections at the Indrad and Dahej plants and this time the management sounded more confident, given that the agency has resumed the process at facilities of a few other Indian companies.
“We expect them to visit us in the coming months but cannot give a firm timetable. So, hopefully in the next, let's say three months' time, and we are prepared for it,” said Gupta.
While a 3-5% reduction in product prices was an intrinsic part of the generics business, the erosion has been high-single to low-double digits of late. Torrent has been unable to launch new products, which generally make up for price erosion, since March 2019 due to a lack of fresh approvals which can only come post an FDA inspection of manufacturing units and processes, management said.
“Once the facilities are cleared up, we have about 55 ANDAs [abbreviated new drug applications] pending with the FDA, so we would expect them to be approved rapidly. Many of them would still have commercial value on the market and customers would be interested in sourcing them from us,” Gupta said.
Some launches are expected from the Levittown unit in the US, which should contribute to revenues from fiscal Q3, with a meaningful impact seen beginning FY23. Meanwhile, an expansion of domestic production capacity might begin by the end of FY23.
Launches In Other Geographies
Torrent’s US performance was somewhat offset by a 13% quarter-on-quarter growth in Q2 India revenues to INR10.9bn and a 21% quarter-on-quarter growth in Brazil to around INR1.6bn. However, Germany also saw a fall of 4% over the previous quarter to clock revenues of INR2.5bn due to supply delays, channel inventory reduction and customer consolidation. (Also see "As US Slows Down, Torrent Aims For Germany, Brazil" - Scrip, 9 Feb, 2021.)
As a result, net profit slid to INR3.2bn compared to INR3.1bn in the second quarter of the previous year and INR3.3bn in Q1 FY22.
Brokerage firm Dolat Capital Market, which maintained an “accumulate” rating on the stock, expects a compounded annual growth rate (CAGR) of 13% in FY21-23, even as margins come off in fiscal 2022. Torrent’s growth visibility is likely to improve from the second half of FY22, with new launches expected in several markets. 15 domestic launches are expected in FY22 while the company has guided for 8-10 launches every year in Germany and five launches in Brazil in that financial year.
On the other hand, Edelweiss Securities, which maintained a “reduce” recommendation, factored in a 16% CAGR in earnings per share over FY21-24 and saw limited scope for an earnings upgrade, as domestic growth remains price-driven and volume growth flattish, along with a lack of visibility on US FDA remediation timelines, new launches in the US being unlikely to move the needle and higher R&D and tax rates offsetting efforts at controlling expenditures.