Sun Gives Ranbaxy New Lease of Life

The $3.2 billion all-stock deal dethrones Abbott Labs as largest pharma firm in India

Published: 08th April 2014 06:00 AM  |   Last Updated: 08th April 2014 01:43 AM   |  A+A-

Sun Pharmaceuticals Ltd’s $3.2 billion acquisition of Ranbaxy Laboratories Ltd dethrones US-based Abbott Laboratories as the largest pharma firm in India in terms of domestic sales ($1.1 billion).

Sun, which was until now at the second spot, will emerge as number one in India and fifth largest generics player globally next to Teva, Sandoz, Actavis and Mylan Inc.

While analysts term the deal as win-win for both Sun and Ranbaxy, they also underscore issues such as regulatory hurdles to potentially make the road bumpy for Sun Pharma.

Industry peers, however, are optimistic that the company’s founder Dilip Shanghvi will steer Ranbaxy to its glory again. “Great move by Sun. Consistent with their strategy of acquiring distressed assets and turning them around,” said GV Prasad, chairman, Dr Reddy’s Laboratories Ltd.

Kiran Mazumdar Shaw, Chairman, Biocon added, “Ranbaxy’s acquisition by Sun will build an even greater and formidable India generics power house.” 

Incidentally, Sun and Ranbaxy are under the FDA scanner, with Ranbaxy facing import ban at its multiple manufacturing facilities in India. The US is crucial as the combined revenues comprise nearly $2 billion, or half the combined entities revenues.

Also, US is an important market with Indian companies accounting for 40 per cent of the US generics market only next to Canada.

“Sun with its recent and past experience in handling the US FDA looks very well placed to turn the situation around for Ranbaxy,” said Bhavik Narsana, Corporate Partner, Khaitan & Co.

The promising aspect for Sun includes some of Ranbaxy’s pending product approvals’ such as first-to-file drugs and exclusive generics launch of anti-hypertensive product Diovan and Valcyte product. Besides, Ranbaxy’s stronghold in the Indian and US market is expected to complement Sun’s business.

Meanwhile, analysts also say, the deal may set the tone for potential acquisitions in the domestic pharma industry.

The sector in the past witnessed few major deals including US-based Abbott Labs’ $3.8 billion acquisition of Piramal Healthcare in 2010 and Japanese major Daiichi Sankyo’s acquisition of Ranbaxy Laboratories for $4.6 billion in 2008.

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