Ranbaxy Laboratories Limited (NSE:RANBAXY) (OTCMKTS:RBXLY) got green light from the U.S. Food and Drug Administration (FDA) to launch its generic version of Novartis AG (ADR) (NYSE:NVS) (VTX:NOVN)’ Diovan with 180-day exclusivity.

Ranbaxy Laboratories

Ranbaxy’s wholly-owned subsidiary Ohm Laboratories Inc. received the FDA nod Thursday to produce a generic version of Novartis AG (ADR) (NYSE:NVS) (VTX:NOVN)’s blockbuster.

FDA’s nod in favor for Ranbaxy’s valsartan

Ranbaxy Laboratories Limited (NSE:RANBAXY) (OTCMKTS:RBXLY) has been anticipating marketing approval of valsartan, a generic drug for the treatment of high blood pressure and heart failure. However Thursday’s announcement is a sweetener to Ranbaxy which has been facing a succession of increasingly stringent regulatory action by the FDA, after inspectors found manufacturing and safety issues at Ranbaxy plants, including evidence that workers were fudging test results.

In a statement, Ranbaxy said its New Jersey-based subsidiary Ohm Laboratories Inc. has received approval from the FDA for manufacturing and marketing Valsartan tablets in strengths of 40 mg, 80 mg, 160 mg and 320 mg on an exclusive basis. The FDA has also determined the Ohm formulation to be bio-equivalent and have the same therapeutic effect as that of the branded drug Diovan.

Plethora of problems

Swiss drug maker Novartis AG (ADR) (NYSE:NVS) (VTX:NOVN) lost is patent rights to Diovan in the U.S. at the end of 2012, though it has avoided generic competition due to multiple quality control problems at Ranbaxy that prevented the company from exercising its right to become the first generic version of the drug on the market.

Ranbaxy Laboratories Limited (NSE:RANBAXY) (OTCMKTS:RBXLY) was supposed to commence Diovan production in late 2012. However, the Indian plant that was to produce the drug was barred from exporting to the U.S. by the FDA. The company has been able to begin producing generic Diovan by outsourcing ingredient production to a third-party, since its own ingredient plants are barred from sending products to the U.S.

Sean Mclain of The Wall Street Journal points out that the delay in generic Diovan’s launch has provided a substantial windfall of around $100 million gross profit for Diovan’s creator Novartis AG (ADR) (NYSE:NVS) (VTX:NOVN).

Consequent to losing patent protection around the world since 2011, sales of Diovan have been falling. For instance, its revenue dropped to $3.52 billion in 2013 as against $6.05 billion generated in 2010.

The latest nod to Ranbaxy Laboratories Limited (NSE:RANBAXY) (OTCMKTS:RBXLY) to launch Diovan is a good news for the 17 other drug manufacturers who are permitted to produce generic copies of the drug once Ranbaxy’s exclusivity period expires.