* $100 bln worth of drugs coming off patent in next 2 yrs
* Indian companies face competition, lawsuits, stricter regulator
* Mylan lawsuit over Lipitor a sign of more to come
* Indian firms' violations of manufacturing rules could crimp FDA approvals
* Indian pharma index down 9 pct this year
By Bharghavi Nagaraju
BANGALORE, April 12 (Reuters) - Indian makers of generic drugs have a fight on their hands as they scramble for access to the $100 billion worth of drugs coming off patent over the next two years.
Fierce competition and lawsuits from rival generic firms, a stricter U.S. health regulator and compliance issues are some hurdles Indian pharmaceutical firms face in their race to grab the opportunity.
In a sign of what lies ahead, U.S. generic drug firm Mylan last month sued the U.S. Food and Drug Administration in an effort to block Ranbaxy Laboratories from getting a six-month head start on marketing a generic version of the world's largest-selling drug, Pfizer's Lipitor. [ID:nN21120116]
"Though this litigation will turn on its own merits, a number of others can be anticipated to follow given the sheer size of the market that will be vacated by the erstwhile patent-protected products as the patents expire," said Hitesh Gajaria, executive director with KPMG.
Some manufacturers from India and elsewhere have also run afoul of U.S. regulators over manufacturing standards and processes, potentially crimping their ability to win approvals.
Sun Pharmaceutical Industries , for example, has three sites under FDA investigation and has said it is working on remedial measures for compliance.
Managing Director Dilip Shanghvi said in February that compliance issues meant Sun was likely to file for 20 to 22 drug approvals in the year ended in March, down from its earlier target of 30.
"The companies will have to tighten the norms and make sure they are in compliance with all the norms all the time," said analyst Ranjit Kapadia at HDFC Securities.
"It is a part of business but a major concern."
Another worry is the longer time taken for generic drug approvals as the FDA deals with a backlog fuelled by competition and becomes more stringent on quality, analysts said.
It now takes the FDA more than 30 months to approve a generic drug -- where as a year ago it took 25 to 30 months -- which is likely to hurt the margins of drug makers, PINC Research's Sushant Dalmia said.
BIG OPPORTUNITY
Indian drug firms, which account for about a third of U.S. applications for approval to sell generics, could add $2 billion to $2.5 billion in U.S. sales in the next five years, doubling their revenue from the country, according to Morgan Stanley.
But that opportunity will not be easily won and investor sentiment is reflected in the decline in share prices.
The Indian pharmaceutical index is down more than 9 percent this year, versus a near 6 percent fall in the broader market .
"The broad pharma sector has not come up from a market perspective because of the underlying fear of possible litigations," said Rakesh Rawal, CEO of private wealth management at Anand Rathi Financial Services.
BLOCKBUSTERS UP FOR GRABS
Drugs worth more than $140 billion are likely to go off patent in the next five years, analysts said, and the right to sell blockbusters such as Lipitor will be especially contentious.
In the next few years, Ranbaxy, Sun and Dr Reddy's will compete for a host of big-ticket drugs losing patent protection, including Forest's Alzheimer's drug Namenda and anti-depressant Lexapro, and blood clot drug Plavix, sold jointly by Bristol-Myers Squibb Co and Sanofi-Aventis .
Generics are poised to increase their market dominance in the next few years in the United States, driven by the wave of patent expirations, rising from 77 percent of prescriptions in the first half of 2010 to as much as 85 percent by 2014, according to a forecast by IMS Health Inc.
Health insurers, pharmaceutical benefit managers and other healthcare payers also push consumers to use generics to help control spending after the U.S. government enacted a broad healthcare reform law last year.
"The next two to three years is going to be good. Lots of Indian companies are well-geared for exploiting this market. Turnover will zoom, profits will zoom," said Ramesh Swaminathan, Lupin's president for finance and planning.
"However, there will be lots of lawsuits. It is going to be extremely competitive," Ramesh said. "The FDA will be a lot more diligent."
At the end of December, Lupin had 137 applications filed with the FDA, with 47 approvals won to date.
LAWSUIT TROUBLE
With so much at stake, rival generic drug makers such as Israel's Teva and Mylan, as well as the patent holding companies, are expected to leave no stone unturned.
In its lawsuit, Mylan contends that Ranbaxy, controlled by Japan's Daiichi Sankyo , should be forced to forfeit its exclusivity period to sell Lipitor because it violated the FDA's application integrity policy. A victory for Mylan could cost Ranbaxy $500 million to $600 million in revenue.
In 2009, the FDA accused Ranbaxy of falsifying test results and data in drug applications and halted reviews of products from the firm's Paonta Sahib plant in northern India.
The FDA has asked for a dismissal of Mylan's lawsuit, according to media reports.
Analysts expect Ranbaxy, whose shares have lost 23 percent so far this year, to launch generic Lipitor in November, given U.S. approval of its generic version of Pfizer's Alzheimer's drug Aricept and its plans to move the manufacturing of generic Lipitor to New Jersey from Paonta Sahib.
While that may placate regulators, moving manufacturing to the United States also undermines the cost advantage of producing in India.
"There is plenty of opportunity for generics," said Sujay Shetty, leader, India pharmaceutical and life sciences at PricewaterhouseCoopers.
"But unfortunately competition is very fierce both from big pharma and incumbent generics." (Editing by Tony Munroe and Vinu Pilakkott)