India's Sun Pharma buys troubled rival Ranbaxy for $3.2 bn (Update)

India's third-biggest drugs company Sun Pharma announced Monday a $3.2-billion deal to buy larger domestic rival Ranbaxy from Daiichi Sankyo, ending the Japanese company's costly run as owner.

Despite Ranbaxy's huge US safety regulatory problems, Sun Pharmaceutical Industries said the transaction offered "tremendous growth opportunities" thanks to Ranbaxy's "significant presence" in the US market as well as in India and other high-growth emerging markets.

"Sun Pharma and Ranbaxy will have a diverse, highly complementary portfolio of specialty and generic products," Sun Pharma managing director Dilip Shanghvi, who founded the company in 1983, said.

But the immediate winner from the deal, analysts said, was Daiichi which extricates itself from its troubled ownership of Ranbaxy while striking a strategic partnership with Sun Pharma.

Daiichi Sankyo's shares were up 3.3 percent at 1,813 yen in Monday's trade.

Daiichi bought New Delhi-based Ranbaxy, India's biggest drug firm by sales, in 2008 for $4.6 billion, believing its dominance in cheap generic medicines would boost the Japanese firm's revenues.

But the Indian company created a huge drain on Daiichi's finances after US regulators slapped import bans on Ranbaxy drugs over quality concerns, and a year after its purchase, the Japanese company announced a $3.84-billion loss on the deal.

"There's no doubt the biggest beneficiary of this (latest) deal is Daiichi," Surya Patra, pharmaceutical analyst at Mumbai's PhillipCapital, told AFP.

The Japanese company will hold about 9.0 percent of the new firm and have a right to nominate one director to Sun Pharma's board under the deal, which involves purchase of $3.2-billion in Ranbaxy shares and the assumption of $800 million in debt which Sun said made the total transaction worth $4 billion.

The agreement would create India's largest drugs manufacturer and the fifth-biggest worldwide by sales while Ranbaxy shareholders will get a nearly 20 percent premium to the average 30-day share price.

Daiichi's President Joji Nakayama acknowledged that his company came out a loser financially, but added that "we've learnt a lot of things and got lots of ideas".

"Today, we have a partnership with a world-leading generic pharmaceutical firm," he told reporters in Tokyo.

"And we're aiming to achieve a great result that will overwhelm our past investment."

US safety concerns

India, known as "pharmacy to the world" because of its vast generics market, supplies medicines to more than 200 countries and is the second-largest US drugs supplier after Canada.

Ranbaxy's shares were down nearly five percent at 437.65 rupees in afternoon trade. Sun Pharma stock was up 1.36 percent at 479.65 rupees as the company said the deal would give it access to Ranbaxy's pipeline of generic drugs and vast Indian rural distribution network.

Sun, based in financial hub Mumbai, said it expected the deal to close by the end of 2014, pending regulatory approvals.

The purchase comes just months after the US Food and Drug Administration (FDA) slapped an import ban on Ranbaxy's fourth plant in India for failing to meet "good manufacturing practices" after bans on the other three.

Sun Pharma, some of whose products the FDA also banned last month over safety concerns, said it intended to work hard to get the banned Ranbaxy facilities re-certified as safe.

"The first focus will be on compliance," managing director Shanghvi told analysts in a conference call, referring to the FDA quality demands.

Ranbaxy last year pleaded guilty in the United States to charges of making adulterated drugs and agreed to a record $500-million settlement, after a whistle-blowing employee revealed a "complicated trail of falsified records and dangerous manufacturing practices".

Aditya Khemka, pharmaceutical analyst at Ambit Capital in Mumbai, said the deal looked attractive despite Ranbaxy's regulatory troubles.

"We need to now see what savings and incremental revenues Sun Pharma can generate from Ranbaxy," he said. Sun said the acquisition was expected to add to its cash earnings per share in the first full year.

Ranbaxy's net loss narrowed to 1.59 billion rupees ($25.6 million) for the quarter ended December 2013 from a 4.92-billion-rupee loss a year earlier, thanks to rising sales in key markets and currency gains.

The combined entity will have operations in 65 countries, 47 manufacturing facilities across five continents and annual revenues of $4.2 billion.

add to favorites email to friend print save as pdf

Related Stories

Shares of India's Ranbaxy slide 19% on new US FDA ban

Jan 24, 2014

Shares in one of India's biggest drugmakers, Ranbaxy Laboratories, slid 19 percent Friday after the US Food and Drug Administration suspended imports from a fourth manufacturing plant of the firm.

Ranbaxy taking 'stringent steps' to end US FDA ban

Sep 21, 2013

India's biggest drugmaker by sales, Ranbaxy Laboratories, has assured shareholders it is taking "stringent steps" to resolve a US ban on imports of medicines made at its newly renovated showcase plant.

Recommended for you

Determine patient preferences by means of conjoint analysis

17 hours ago

The Conjoint Analysis (CA) method is in principle suitable to find out which preferences patients have regarding treatment goals. However, to widely use it in health economic evaluations, some (primarily methodological) issues ...

FDA approves hard-to-abuse narcotic painkiller

Jul 25, 2014

(HealthDay)—A new formulation of a powerful narcotic painkiller that discourages potential abusers from snorting or injecting the drug has been approved by the U.S. Food and Drug Administration.

Race affects opioid selection for cancer pain

Jul 25, 2014

(HealthDay)—Racial disparities exist in the type of opioid prescribed for cancer pain, according to a study published online July 21 in the Journal of Clinical Oncology.

FDA approves tough-to-abuse formulation of oxycodone

Jul 25, 2014

(HealthDay)—Targiniq ER (oxycodone hydrochloride and naloxone hydrochloride extended release) has been approved by the U.S. Food and Drug Administration as a long-term, around-the-clock treatment for severe ...

Tough-to-abuse formulation of oxycodone approved

Jul 25, 2014

(HealthDay)—Targiniq ER (oxycodone hydrochloride and naloxone hydrochloride extended release) has been approved by the U.S. Food and Drug Administration as a long-term, around-the-clock treatment for severe pain when other ...

User comments