Indian drug major Cipla has launched generic versions of anti-flu drugs oseltamivir and zanamivir in the local market to treat the H1N1 influenza, which is spreading across the globe and in India.

Cipla will brand oseltamivir in the local market as Antiflu and zanamivir as Virenza. Antiflu will cost Rs 475 for 10 capsules, in line with the price of competing products in the market. Virenza — an inhaled drug — will cost Rs 800, which includes the price for an inhalation device.

Cipla's Antiflu is a copycat version of Swiss multi-national Hoffmann-La Roche's Tamiflu and Virenza is the copy of GlaxoSmithKline's Relenza. Both drugs, used globally to treat the ongoing H1N1 pandemic, lack patent protection in India as these are pre-1995 innovations. Such innovations are not granted patents in India, according to the product patent regime introduced in the country since 2005.

Dr Y K Hamied, chairman and managing director of Cipla, said his company was equipped to make 2 million doses of oseltamivir a month, in case of any eventuality. Already 450 people have died of H1N1 in India and the winter season may cause further spread of the virus, he said.

“Now the US is facing a shortage of oseltamivir and we have informed our readiness to supply the drug if needed. We make about 20 drugs in the anti-viral segment and are among the global leaders in this category,” said the Cipla chief, who revolutionised HIV/AIDS treatment globally by selling generic drug cocktails at less than a $1 per day.

Both drugs have patent protection in many developed countries, including the US and Europe. Hyderabad-based Hetero is the only supplier licensed by Roche to market oseltamivir in India under the brand name Fluvir.

On August 28, the Indian government had allowed restricted retail sale of the drug under Schedules X category of the Drugs and Cosmetics Act, similar to the sale of narcotics drugs. Six Indian companies — Ranbaxy, Cipla, Strides Acrolab, Hetero, Hetco and Roche — were allowed to manufacture and sell the drug. The government has also stockpiled the drug from these manufacturers for supply through government channels.

Two months ago, Natco Pharma had launched its version Natflu in the Indian market at a price of Rs 475 for a bottle of 10 capsules.

“In 2005, we had stockpiled about 2.5 tonnes of oseltamivir but there was no demand and about
$15-20 million worth products had just piled up as inventory,” said Hamied.

Cipla has so far exported about $10 million worth of Antiflu to countries in Latin America, Africa, South-East Asia and West Asia, where the drug lacks patent protection.

Countries with patent protection for these drugs can also allow generic players to manufacture and market it, invoking compulsory licence provisions of the patent rules, which allow breaking of patent rules during emergency, said Hamied.

“Shortage or monopoly of any drug will cause panic among people during such pandemic attacks,” he added.

Hamied has suggested that governments should encourage stockpiling of shikimic acid, which is extracted from the ‘Chinese Star Anise' and is used as a base material for production of oseltamivir through a 14-step chemical process, instead of stockpiling the finished drug.

Drug maker Cipla today reported a growth of 10 per cent in its consolidated net profit for the financial year ended March 31 to Rs 771.02 crore.

The company had a consolidated net profit of Rs 701.04 crore during the 2007-08 financial year, Cipla said in a filing to the Bombay Stock Exchange (BSE).

The consolidated total income of pharmaceutical firm rose to Rs 5,326.04 crore in the latest fiscal from Rs 4282.92 crore of a year earlier.

The company has declared a dividend of Rs 2 per share for the year 2008-2009.

On a standalone basis, Cipla posted a net profit of Rs 776.82 crore during FY'09, an 11 per cent rise compared to Rs 701.43 crore of FY'08.

Shares of Cipla today closed at Rs 272.15, almost flat from its previous close on the BSE.

New Delhi: The domestic pharma retail market posted a healthy growth of 10% in May over the previous month. The pharma market registered a strong growth over the first three months, January to March growing double digit. The growth seems to have dipped slightly during two months April and May to a little over 10% 10.1 and 10.2% respectively.

On a moving annual total basis (April'08 to May'09), the organized pharma retail market grew by 10.4% to Rs 36,048 crore, which was slightly higher than the previous month's value of Rs 35,675 crore, according to consulting company, ORG-IMS.

The market was valued at Rs 3,104.12 crore during May, slightly lower than previous month's figure of Rs 3,146 crore. During the month, there was little change in the top rankings of companies. Cipla occupied the top slot in terms of market share, followed by Ranbaxy and GlaxoSmithKline on the third position. Piramal Healthcare was ranked fourth, followed by Zydus Cadila which moved to the fifth slot. Zydus displaced Sun Pharma, which had moved to the fifth position in April.

For some time now, Cipla has been dominating the top slot followed by Ranbaxy and GSK in terms of market shares.

Also, there were some movements as far as the top 20 companies were concerned with Dr Reddy's Labs, Wockhardt-Merind and Emcure gaining one rank each, to move up to rank 11, 14 and 16 positions respectively, according to ORG-IMS.

Amongst medicine brands, pain killer drug Voveran maintained its top position. Iron supplement Dexorange and lipid lowering medicine, Strovas leaped three ranks and jumped to rank five and 20 respectively. Oral rehydration salt Electral, pain killer Spasmo-proxyvon and Asthalin (for managing asthma) were the highest gainers, moving four ranks each to nine, 15 and 16 positions respectively.

Among the top 20 products, antibiotic drug Taxim, health supplement Liv-52, antibiotic Mox, Taxim-O, gained one rank each and moved up to ranks eight, 11, 13, and 17 respectively. Aciloc gained seven ranks and entered the top 20 list at rank 18 during May.

The World Health Organization (WHO) has declared Swine Flu a 'pandemic'. Swine Flu has thus become the first global pandemic in 41 years. Official reports say there are 28,000 cases of Swine Flu globally.

Amar Lulla, Joint MD, Cipla , said India needs to have adequate stocks of drugs like Oseltamivir and Zanamivir to fight this pandemic.

Here is a verbatim transcript of the exclusive interview with Amar Lulla on CNBC-TV18. Also see the accompanying video.

Q: The fact that the WHO (World Health Organisation) has now declared the Swine Flu a global pandemic, what does this mean for somebody like you?

A: It just means that we need to be prepared. I think more than us it is important that the country is prepared to face this eventuality.

Q: Has the WHO or any other government got in touch with Cipla for Tamiflu?

A: Yes, there have been various Latin American countries that have been in touch with us and have been procuring Oseltamivir from us.

Q: How does it impact the pharma industry as well materially? Is there a race on now to perhaps get a Swine Flu vaccine going?

A: Yes, that would be the objective. Ultimately, that would be the way forward. But right now it is still very early to have the vaccine. So, we need the treatment, we need Oseltamivir, and need Zanamivir. These drugs should be adequately stocked.

Many basic, life-saving medications remain unaffordable in low- and middle-income countries. Spurred on by that fact, Yusuf Hamied, chairman and managing director of Cipla Pharmaceuticals, has steered his enterprise to the forefront of global pharmaceutical development by manufacturing low-cost drugs for diseases like AIDS, diabetes and arthritis, among others.

Cipla has faced challenges in India and abroad from multinational pharmaceutical companies looking to protect their patents on particular medications, including antiretroviral drugs used to combat HIV infections in countries like South Africa, where access is severely limited by the annual per-person cost of US$10,000 to US$15,000. Most recently, the Delhi high court awarded Cipla the right to continue selling a low-cost generic equivalent of the lung cancer drug Tarceva following a patent-infringement suit by the drug's manufacturer, Swiss pharmaceutical company Hoffman-LaRoche.

Born in Lithuania but raised in Mumbai, Hamied received a PhD in chemistry from Christ's College, Cambridge University . In 2005, the Indian government gave him the Padma Bhushan award, one of the country's highest civilian honors.

In an interview with India Knowledge@Wharton, Hamied describes his company's skirmishes with multinationals looking to protect their patents on particular medications and explains why rules governing intellectual property rights in industrialized nations should not apply to poorer countries.  

India Knowledge@Wharton: What are the key lessons to be learned by Indian lawmakers from the controversy in AIDS-ravaged South Africa ?

Yusuf Hamied: The controversy in AIDS-ravaged South Africa gives you a glimpse of what's in store in a monopoly. India must seriously examine its Intellectual Property Rights (IPR) position and see how best TRIPS (Trade Related Intellectual Property Rights) can be interpreted, as IPR laws are national laws. India should cull the best points from various laws to suit her future needs. For example, American patent laws include the Bolar Provision, so that generic companies can have products ready for sale as soon as a patent expires. Compulsory licensing is valid under TRIPS and can be invoked when there is a national emergency. But diseases like malaria, tuberculosis and leprosy are permanent, perpetual and even perennial emergencies in countries like India, and I'd say that we need a system of automatic license of right for a fixed royalty to the patent holder (typically, about 2% to 4% of net sales).

In fact, many of these issues were raised in the I.K. Gujral Committee Report in 1993. The committee was of the opinion that India should insist on automatic licensing in certain circumstances, besides recognizing the need that countries at different stages of development need to be treated differently.

India Knowledge@Wharton: Are you suggesting that India reconsider TRIPS itself?

Hamied: I'd suggest a "TRIPS north" and a "TRIPS south," where the north comprises 600 million people in the developed world while the south comprises the 3 billion people of the Third World . The rules of industrial nations should not necessarily apply to poorer nations. Ninety percent of the profits of multinationals are made in the north and not the south, and that's what constitutes the R&D component [for these companies]. In fact, I would go so far as to say that if TRIPS is not changed, India and other like-minded countries should walk out of the WTO and form the TWTO (Third World Trade Organization).

India Knowledge@Wharton: The WTO supports legal protection of intellectual property rights of multinational pharmaceutical patents, as does the U.S. government, which is strongly lobbied by the multinational pharma industry. Then we have the UN, which is slow when it comes to fighting for the have-nots to ensure that they have access to reasonably priced generic medication. On the other hand, we see World Health Organization endorsing your generic drugs for quality and approving processes used in generic factories. Where do you stand in this difficult situation?

Hamied: Only once a patent expires in a particular country can that product be manufactured in the country. "Generic" is "post-patent" -- or, by extension, off patent, and therefore non-monopolistic. This question of monopoly of drugs in the future -- if the Americans, Europeans and Big Pharma get their way -- could be a disaster for the third world.

India Knowledge@Wharton: With the re-introduction of patent rights in 2005 in India , what happened to the companies that sprouted up after 1972, when generic copies were legalized? What happened to Cipla's production of generic drugs? Did it come to a grinding halt? If you are still producing, is it now illegal?

Hamied: No. The cut-off point is 1995: It is legal to replicate any drugs invented and patented in India pre-1995, but post-1995 it is not permitted. However, the drugs invented after 1995 will only enter the market around 2012-2015, which is when we will begin to feel the pinch. Currently, in the Third World , older drugs don't die. They coexist with newer ones. As patents expire, we acquire the legal right to manufacture off-patent drugs, making it a continuous process.

India Knowledge@Wharton: There have been a number of new judgments related to intellectual property protection that Cipla contributed to, such as your win over Roche that ensured an uninterrupted supply in India of a low-cost medicine for treating lung cancer. What do you think about the country's evolving IP legislation?

Hamied: I'm told that the judges and staff at the patent office have been trained by American officials, which means that they will be blinkered. But I am particularly interested in these questions: How is it that so many health care patents have been granted in such a short time period? Are the patents properly examined? Just because a patent is granted in Europe or America , does that mean it passes the Indian Patent Law, which is different?

These questions are of particular relevance to the new clause 3d in the Indian Patent Act (which refuses patent protection to new forms, uses or minor modifications of existing drugs unless they differ significantly with regard to efficacy). Approximately 7,000 patents were filed before clause 3d [came into existence]. In the presence of this new clause, 60% of these patents are not valid. Why aren't they voluntarily withdrawn? It is only fair that those who filed for these patents revise them.

India Knowledge@Wharton: Why do you think the Government is bringing changes to the IP regime?

Hamied: If you ask the Indian government, they have a ready answer: "We can't upset the international community." I told them, "But gentlemen, the patent law is a national law. How are you upsetting the international community when India 's overall international trade is 0.8% of world trade? We'll reach 1% by 2010. What is the big deal? Who is benefitting?" While the world [pharmaceutical] trade market is pegged at US$700 billion, India stands at a mere US$7 billion.... I am not against patents, but India cannot afford them. I am against monopolies.

India Knowledge@Wharton: Can drugs from Big Pharma reach all of India ?

Hamied: They can only do so in an aura of monopoly. That is why [multinationals] gave up India in 1972. We didn't reach this position overnight. It took 10 to 20 years for Indian companies to grow. Right now, we are in a period of stabilization. The multinationals will stand to gain when we start losing out. The cutoff date is 2012 or 2015, when patents for older drugs die and newer drugs, which doctors will want to use, enter the market. And that is when I will say that the Indian government has committed selective genocide in India .

India Knowledge@Wharton: In your opinion, how does India balance the rights of a patent holder while providing affordable health care for all?

Hamied: The fact is that health care in India has always been in a state of perpetual crisis. The disease profile is frightening: 80 million cardiac patients, 80 million affected with mental illness, 60 million diabetics, 50 million asthmatics, 50 million hepatitis B cases, and one in three Indians is a latent carrier of TB. The World Bank has said that India will have 35 million HIV cases by 2015, approximately half of all the AIDS cases in the world. Given these facts, the patent regime in this country should be so devised that utmost priority is given to secure the people's right to access affordable, quality health care without monopoly. This can be achieved by an automatic license of right with a suitable royalty payment on net sales to the innovator. Even a developed country like Canada followed this policy from 1969 to 1992, under the Canadian bill S-91.

Apart from this, if at all, the government should only allow patents filed after January 1, 2005, [to be considered] product patents. (As a member of the WTO, India set a goal to make its patent legislation TRIPS-compliant by January, 2005.) Also, problems such as "evergreening" (when innovator pharmaceutical companies abuse the patent and regulatory systems to delay the legitimate entry of generic competition) and frivolous patenting should be carefully reviewed. Compulsory licensing provisions have to be favorable for the indigenous industry, as also patenting by Indians internationally. Importation of a patented product alone should not be considered as operative of a working patent.

We need to take a closer look as to what is best for India . One cannot have the same laws for 600 million people in the developed world and 3 billion people in the Third World . Globalization of health care does not mean that the sick and needy are denied access to drugs at affordable prices.

India Knowledge@Wharton: How do you explain this to politicians and policy makers?

Hamied: I try. I'll give you an example of what happened to me. All over the world, we [offer] a certain medicine that stops AIDS transmission from mother to child, free of cost. I showed it to an Indian politician several years ago. He asked me if I give this drug free of cost, and I said "yes." Do you know what his response was? "You must have an ulterior motive." I laughed and said, "Yes, I do have an ulterior motive. I want to do some good before I die. I am not going to take any of this [with me] when I die!"

You see the mindset?

Leading drug maker, Cipla has received final approval from the US Food and Drug Administration (USFDA) to market Pamidronate disodium injection, in the strengths of 30 mg/vial, 60 mg/vial and 90 mg/ vial.

Pamidronate disodium acts on bone to help regulate blood calcium levels. It is used to treat Paget`s disease of bone and to treat high blood calcium levels.

The medication is also been used in the treatment of osteoporosis, to reduce bone pain associated with certain illnesses and to treat bone loss due to breast cancer.

Shares of the company declined Rs 2.1, or 1.13%, to settle at Rs 183. The total volume of shares traded was 231,412 at the BSE (Wednesday).

Amidst all the gloom confronting the economy, the pharma sector posted a robust growth of over 14% in September, with Cipla emerging as leader in the domestic retail market with a market share of 5.31% in September, overtaking Ranbaxy.

Till July this year, Ranbaxy had been leading with a 5.10% share of the market. In September, Ranbaxy ranked second garnering a 5.11% share, while GlaxoSmithKline occupied the third slot with 4.47% market share. Piramal Healthcare and Zydus Cadila were ranked fourth and fifth in the domestic market with shares of 3.75% and 3.59% respectively.

The domestic pharma market posted a healthy growth of over 14% in September, with the market valued at Rs 33,605 crore, according to consulting company, ORG IMS. The market had grown by over 12% in August. Pharma companies are, however, not posting strong financial results in the second quarter due to other factors like input and over-head costs.

In September last year, the company rankings were pretty much the same with Cipla leading with a share of 5.09%, followed by Ranbaxy at 4.90% and GSK at 4.86%. Cipla has maintained the top slot in the market for the last two years.

On a moving annual total basis in September (12-month period ended September), major gainers (in value terms) include Cipla at 17.7%, Ranbaxy and Sun Pharma each at 17.6%, Lupin at 20.9% and Mankind at 35.4%. Overall, the pharma market grew by nearly 13% on a MAT basis in September.

During the month, the respiratory segment has shown a healthy growth of 14%, while anti-infectives have recorded over 18% growth and cardio-vascular drugs grew by 18%.

Unlike other sectors of the economy, the domestic pharma market has been able to sustain its growth over the past one year, with a CAGR of 15%. Chronic therapy has consistently increased its contribution to the domestic market with the share of acute segment considerably shrinking over the past few years.

Within the chronic segment, anti-diabetic drugs have shown the highest value growth, followed by cardiac therapy during first half of the year. Anti-infective drugs have also recorded a robust growth during the period. During the six-month period, gastro-intestinal therapy grossed the third highest value in the market, followed by the respiratory category.

Stronger exports have helped boost revenues.

Driven by a smart 50 per cent growth in exports, the Rs 4,227 crore Cipla posted a top line growth of nearly 34 per cent in the June 2008 quarter. The relatively low base of Q1FY08 and a weaker rupee notwithstanding, this is the fourth quarter of successive good growth recorded by the drug major.

Revenues from the home market in June too have grown at a reasonably good 16 per cent and consequently the operating profit margin expanded 360 basis to 22 per cent, after adjusting for a forex loss of Rs 75 crore. The forex loss, however, depressed the net profit which rose just 17 per cent to Rs 140 crore.

Exports accounted for about half the firm's revenues of Rs 1207 crore last quarter. Analysts believe the higher sales of active pharmaceutical ingredients (API) could have included supplies to Teva, for a product sold exclusively in the US for a period of 180 days.

However, since such orders for supplies during periods of exclusivity do not recur too often, it will be sales of formulations that will determine the pace of Cipla's exports in subsequent quarters.

To sustain a 25-30 per cent growth in exports, however, the company will need to increase the proportion of high value products, like inhalers, to regulated markets. Cipla, which has launched asthma inhalers in Germany , Spain and Portugal , is looking to gain a foothold in the CFC-free inhaler market.

Cipla has one of the strongest pipelines of generics among Indian companies.

The company has pursued a strategy of teaming up with players overseas but does not get involved in patent litigation. It has recently roped in a couple of partners in the US and EU and plans to supply over 100 products to overseas markets in the next few years.

The management believes the company's revenues can grow at 12-15 per cent in FY09 and net profits at around 11-13 per cent.

Indian drugmaker Cipla has received FDA approval for its HIV treatment zidovudine oral solution 50 mg/5 mL, a generic version of GlaxoSmithKline's Retrovir. 

The generic Retrovir application was considered under the expedited review provisions of the President's Emergency Plan for AIDS Relief (PEPFAR), a five-year, $15 billion program aimed at combating HIV and other diseases in 114 countries — including 15 focus countries primarily in Africa — that President Bush announced in 2003.

Zidovudine is a nucleoside reverse transcriptase inhibitor intended to be used with other anti-retroviral agents to treat HIV-1 infection. The approval means no patents or exclusivity prevent marketing the drug in the U.S. The FDA often tentatively approves generic versions of HIV drugs still under patent protection in the U.S. so the generics may be eligible for purchase under PEPFAR for use in other countries, the FDA said.

In February, Matrix Laboratories received FDA approval for its generic version of Retrovir 300-mg tablets.

At a time when the government is aggressively imposing price controls on essential drugs, Cipla has made an unconditional offer to share the know-how of making all 354 essential drugs with the public sector drug manufacturers . This follows the pharma industry's offer to sell the essential drugs at half its maximum retail price (MRP) to the government subject to certain conditions.

Incidentally, Cipla, the largest drug maker in the country by sales, is not a part of the industry association which made the separate offer to the authorities. The firm is willing to share the know-how of making these drugs without any monetary consideration.

Cipla joint MD Amar Lulla told ET, “We are willing to give the technological know-how to manufacture all the 354 essential drugs to the government.” He added that instead of bringing selective price control on brands and drugs, the government can manufacture these drugs in the state-owned units and distribute it through the primary healthcare centres, medical hospitals and public health institutions at reasonable prices.

According to him, this will not only meet the government's objective of providing essential medicines at most reasonable prices, but also make the public sector organisations economically viable. Recently, industry body Indian Pharmaceutical Alliance (IPA) offered to sell essential medicines to the government at 50% of their MRP. They also offered to finance a mechanism to deliver these drugs at a concessional price by contributing 0.25% of their total profits to the government, which could be a little less than Rs 10 crore. This would be in addition to the corporate taxes the companies pay to the exchequer. However, this offer was conditional upon the government limiting the number of drugs under price control to the existing 74 drugs.

Cipla markets 803 products in the Rs 32,000-crore domestic pharmaceutical market with 5.2% market share, according to the latest monthly sales figures of ORG-IMS. The string of such proposals from drug makers comes in the wake of a policy proposal by the government to extend the list of drugs under price control to all essential drugs.

However, a senior industry official said that all the proposals would be irrelevant now as the ministries responsible for regulation and implementation of drug policies have to first sort out their internal differences. The two ministries—Chemical & Fertiliser and Health —which oversee drug firms have overlapping jurisdiction.

Cipla has received tentative approval from the US Food and Drug Administration (USFDA), for Lamivudine/Stavudine 30 mg/6 mg tablets and Lamivudine/Stavudine 60 mg/12 mg tablets for pediatric use.

Lamivudine and stavudine are anti-viral drugs indicated for use in combination with other antiretroviral agents for the treatment of HIV-1 infection.

Shares of the company closed down Rs 5.25, or 2.42%, at Rs 212.1. The total volume of shares traded at the BSE was 470,501 (Friday).

The drug firm has managed to grow its top line but operating margins remain uninspiring. The Rs 4,227 crore drug major Cipla has just seen its best ever quarter for international sales logging a growth of 23 per cent, driven by higher sales of international active pharmaceuticals ingredients and finished dosages. Cipla follows a strategy where it has partners in foreign markets to sell products. While this model limits aggressive profit expansion, since the company has to share profits with the overseas partner, it also involves a lower risk because expenses on marketing and allied costs are lower.

Unlike in recent quarters, where profits have been boosted by technology fees, the March 2008 quarter has seen the both domestic and overseas businesses fare well, the former growing 13 per cent.

However, while Cipla's domestic sales in the March quarter were reasonably good, they were not as brisk as those of players like Ranbaxy, which posted an increase of 16 per cent. Technology fees too brought in some money for Cipla, though less than in previous quarters.

As a result, the company's operating profit grew a fairly impressive 39 per cent to 203 crore, on a revenue growth of 19.6 per cent. However some of it was due to foreign exchange gains rather than from the core business.

So while Cipla may have managed to improve its operating profit margin for the March 2008 quarter by 240 basis points to 18.1 per cent, this was well below the company's run rate for the past two years.

Besides,the higher margins also came off a low base. The street was expecting much more and was disappointed because the margin expansion was more the result of a much lower other expenditure,which dropped nearly 200 basis points as a percentage of sales.

For the full year FY08, the company's operating profit margin fell 290 basis points to just over 20 per cent, because of higher raw material costs.

Moreover, the Cipla management expects to grow revenues by just about 12-15 per cent and maintain margins in FY09, numbers that have not enthused industry watchers. Technology fees could be lower in the coming years and forex gains are unlikely to sustain.

Analysts believe that earnings should grow by about 10-14 per cent over the next couple of years. Other large generic players like Ranbaxy saw operating profit margins improve by 290 basis points to 15 per cent in the March 2008 quarter.

The Cipla stock stayed flat on Tuesday at around Rs 215. At this price the stock trades at 21.6 times estimated FY 09 earnings and are not cheap given the risks in the business. Thus, the stock should be a market performer going forward.

Ranbaxy, at the current price of Rs 485, is somewhat cheaper and trades at under 21 times estimated CY 08 earnings, but that too is expected to perform only in line with the broader market.