Valeant Pharmaceuticals Intl Inc’s (NYSE:VRX) Branded Rx division has been making headlines as the embattled drugmaker struggles to prevent generic competition from eroding the sales potential of several drugs in Salix. Both Xifaxin and Apriso, two of Valeant’s most important gut-drugs, are being targeted for generics. And the company is having mixed success in pushing back these challenges.
The Branded Rx Division
Valeant’s Branded Rx division is one of the company’s core businesses. And it is significantly more stable than the U.S diversified division but less stable than Bausch & Lomb – the consumer eye care and ophthalmology division. Branded Rx contains Salix, one of Valeant’s most important acquisitions and a major growth driver for the company going forward.
Keeping Salix stable will be an important goal for Valeant’s new management team as they try to turn around the company. Unfortunately, however, Salix is the target for several generics, and Valeant will have to successfully protect its patents against these competitors if it wants to prevent Salix’s revenue contribution from collapsing. They are having mixed success towards achieving this goal
Xifaxin is Valeant’s most valuable asset with annual revenue of around $1 billion. The drug was acquired as part of Salix and is used to treat irritable bowel syndrome, traveler’s diarrhea, and many other indications. Xifaxin is a relatively old drug, and it has long been the target of generic competitors.
Last year, Allergan submitted an ANDA for a generic version of Xifaxin called Rifaximin. The story of Rifaxamin is confusing because, while Allergan submitted its ANDA through a subsidiary called Actavis Laboratories, this subsidiary has since been sold to Teva Pharmaceuticals Ltd – a massive generics conglomerate. And Teva has continued where Allergan left off trying to commercialize a generic formulation of Valeant Xifaxin. A generic version of Xifaxin would devastate Valeant’s Branded Rx division so the company’s management team is trying to delay the drug’s LOE as long as possible. To this end, they have successfully pushed back the arrival of Rifaxamin until at least 2019.
However, Valeant hasn’t been so lucky with Apriso, another Salix gastro-drug that is facing generic competition from Mylan. Mylan has successfully challenged two of Valeant’s patents on Apriso, a drug for ulcerative colitis – and this may pave the way for generic competition for that drug. Apriso is one of Valeant’s fastest growing assets in Salix, and it currently generates around $142 million in revenue annually. Loss of patent protections or exclusivities on Apriso would be a major setback for Valeant’s Branded Rx division.
Valeant’s management team is having mixed success in pushing back generic competition for several drugs in the Branded Rx division. Unfortunately for Valeant, the generics are targeting many of the most valuable assets in Salix – probably because these drugs have the most market opportunity. Keeping Salix’s revenue stable will be a crucial goal in the Valeant turnaround process. So far, Xifaxin’s competitor has been pushed back to 2019, but several of Apriso’s patents have been successfully challenged by Mylan, and competition could be on the way.