Sun Pharmaceutical Industries Ltd will buy Ranbaxy Laboratories Ltd for $3.2 billion in the biggest ever Indian pharma deal, creating the world’s fifth largest generic drug manufacturer.
Ranbaxy, a subsidiary of Daiichi Sankyo of Japan, will once again be Indian-owned, and may possibly be able to fix quality issues that has led to four of its factories in India being barred from shipping their products to the US, the world’s biggest drug market.
The Japanese company bought Ranbaxy for $4.2 billion in 2008. Daiichi Sankyo chief executive Joji Nakayama said in Tokyo that the company had learnt a lot about emerging markets through its relationship with Ranbaxy, and saw those lessons as valuable for its global expansion.
According to a Reuters database, the all-share transaction is the biggest deal in the pharmaceutical sector in the Asia-Pacific region in this calendar year. After the acquisition, Sun Pharma’s combined revenue will become $4.2 billion, and make it India’s largest generic drug manufacturer. Under the terms of the agreement, shareholders will get 0.8 Sun Pharma shares for each Ranbaxy share.
During a conference call with analysts, Sun Pharma MD Dilip Shangvi said the deal offered tremendous growth opportunities as Ranbaxy has a significant presence in India and the US.
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“In high-growth emerging markets, (Ranbaxy) provides a strong platform which is highly complementary to Sun Pharma’s strengths. There is very little product-specific overlap between Ranbaxy and Sun products,” he said.
In January, the US Food and Drug Administration banned Ranbaxy’s Toansa plant from exporting anything to the USA because of manufacturing deficiencies.
During a visit by USFDA chief Margaret Hamburg subsequently, the FDA called for improved collaboration with Indian regulators. Sun Pharma’s plant at Karkhadi in Gujarat too was banned from the US in March. Shanghvi said the combined entity would focus on fixing manufacturing quality issues at Ranbaxy, so that the current ban on the facilities is lifted.
Under the deal, expected to close by year-end, Daiichi Sankyo will get a stake of about 9 per cent in Sun Pharma.
After the deal was announced, the shares of the company emerged as the top gainer for the day, rising 2.68 per at the Bombay Stock Exchange. Ranbaxy ended lower by 3.12 per cent.
The 17th feather in Sun’s cap
With its announcement to acquire Ranbaxy, this is Sun Pharmaceuticals’ seventeenth deal since inception.
Set up with five psychiatry products and two-person marketing team in 1983, the company, under Dilip Shanghvi, founder and MD of the company, has come a long way with 16 successful acquisitions to date.
With the addition of Ranbaxy, Sun Pharma would rank fifth among generics makers in the world after Israel-based Teva, US-based Sandoz and Mylan, and Ireland-based Actavis.
After completing eight acquisitions between 1996-2001, the company acquired Bryan, Hungary, Able and Chattem between 2005-2009. In the last four years it acquired URL Pharmaceuticals, DUSA Pharmaceutical, MSD Pharma, Caraco Pharma Laboratories and Taro Pharma. Shanghvi is known for buying distressed firms and turning them around, though Ranbaxy poses a huge challenge.