Swiss pharmaceutical giant Roche (PINK:RHHBY) announced earlier this month that it would not renew the patent for its top-selling breast cancer drug Herceptin in India. The drug lost patent protection in the country during the first week of August this year.
The news is likely to ensure that Herceptin will soon face competition from generic drugs in the country. Biocon, a Bangalore based biotechnology firm, recently completed Phase-III trials of a copycat version of the drug and plans to launch it in the country by the end of Q1 2014. Other players such as Dr. Reddy’s Laboratories (NSE:DRREDDY) and Intas have also announced plans to develop their own variants of Herceptin. 
Despite the fact that India is one of the faster growing markets in the world, we believe that Roche will not be significantly impacted by this decision because India accounts for a very small portion of the drug’s global revenue. Further, we believe that Roche already has alternate plans to cater to the Indian market.
India Does Not Matter Much
According to several Indian news reports, the country’s breast cancer market is pegged at around (INR) Rs130 crores – which amounts to around $20 million at an exchange rate of Rs65 per USD.  At that size, India represents just 0.04% of the company’s 2012 sales of around $48.2 billion and is too small to have any material impact on the company’s financial performance.
Roche Will Still Be Competing In The Indian Markets
Foregoing its patent rights in the country does not imply that Roche has plans to exit from the Indian market. Last year, the company announced plans to launch cheaper variants of Herceptin and Rituxan (another top selling cancer drug from Roche’s stable), after the Indian authorities implemented the compulsory license regime. Under this regime, the Indian government can force patent holders to license their products to local manufacturers if they are deemed to be too pricey for the majority Indians. 
We believe that the decision to reduce prices was a prudent one for Roche because Herceptin and Rituxan are perfect candidates for granting compulsory licenses. They cost around $3,000 to $4,500 a month per patient, whereas an average Indian earns just Rs50,000 (less than $1,000) per year.   With reduced prices, Roche’s drugs are likely to be accessible to a larger section of the Indian society and may benefit from a rapid growth in volumes although margins are likely to be much lower.Notes:
- Dr Reddy’s, Intas to tap India’s Herceptin market, Business Standard, August 21, 2013 [↩]
- Roche’s patent pain to be Biocon’s gain, Business Standard, August 17, 2013 [↩]
- India Appeals Body Rejects Bayer’s Plea on Nexavar, WSJ, March 4, 2012 [↩]
- Roche to slash prices of expensive cancer drugs in India, The Hindu, March 25, 2012 [↩]
- Per capita income crosses Rs 50,000, Times of India, February 1, 2012 [↩]