Richter announced this morning that KV Pharmaceuticals has acquired exclusive rights from Gedeon Richter to market a broad group of generic drug products in the U.S. through KV's own generic marketing division, ETHEX Corporation. The products cover the cardiovascular, diabetes and CNS categories. Subject to FDA approval and patent expiries, the products will enter the U.S. market over the next several years throughout 2017. The estimated branded value of the products, based on 2005 IMS value, is approximately USD 20bn. Richter reports that two of the products are already filed with the FDA and a third one will also be filed shortly.
Note that Richter had a similar agreement with Ivax, however, it never worked in practice, especially after TEVA acquired Ivax and saw a potential competitor in Richter. Currently, we see no reason to be very positive on the agreeement, having serious doubts about the potential turnover of Richter drugs on the relatively saturated US generic markets, where Indian producers are competing with their very low production prices, while others focus on the economies of scale in their marketing. As KV's network could definitely be helpful for Richter to reach patients, the royalty for the drug shipments could be very low. We would wait for further details and clarity regarding the agreement. We maintain our Sell recommendation on Richter.