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Sun pharma ranbaxy acquisition
Sun Pharma acquired Ranbaxy in 2014 in a $4 billion deal to become the largest pharmaceutical company in India and fifth largest globally. The acquisition made Sun Pharma the largest Indian pharma company in the US and provided Ranbaxy with API manufacturing capabilities to resume exports to the US. However, Sun Pharma also assumed $800 million of Ranbaxy's debt and regulatory issues remain resolving quality issues at Ranbaxy's plants that were banned by the USFDA. The merger aimed to create synergies but was expected to negatively impact Sun Pharma's financial performance in the near term.
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Sun pharma ranbaxy acquisition
- 1. Sun Pharma &Ranbaxy Acquisition PresentedBy M.V.SaiMahesh K.S.Harsha Vardhan Introduction: Pharmacy Sector The pharmaceutical industry develops, produces, and markets drugs or pharmaceuticals licensed for use as medications. Pharmaceutical companies are allowed to deal in generic or brand medications and medical devices. The Pharmaceutical industry has grown from mere US$o.3 billion turnover in 1980 to 15 billion in 2012-2013. Globally, India ranks 3rd in terms of volume of production (10 per cent of global share) and 14th largest by value. (1.5 per cent of global share) The reason for lower value share is the lowest cost of drugs in India ranging from 5 to 50 per cent less as compared to developed countries. Indian pharmaceutical industry Sun Pharma: Established in 1983, listed since 1994 and headquartered in India, Sun Pharma is an international, integrated, specialty pharmaceutical company. In India, the company is a leader in niche therapy areas of psychiatry, neurology, cardiology, diabetology, gastroenterology, orthopedics and ophthalmology. The company has strong skills in product development, process chemistry, and manufacturing of complex dosage forms and APIs. The 2014 acquisition of Ranbaxy will make the company the largest pharma company in India, the largest Indian pharma company in the US, and the 5th largest specialty generic company globally.
- 2. Ranbaxy: Ranbaxy LaboratoriesLimited is an Indian multinational pharmaceutical company that was incorporated in India in 1961. The company went public in 1973 and Japanese pharmaceutical company Daiichi Sankyo acquired a controlling share in 2008. Ranbaxy Limited is an integrated, research based, international pharmaceutical company producing a wide range of quality, affordable generic medicines, trusted by healthcare professionals and patients across geographies. Ranbaxy serves its customers in over 150 countries and has an expanding international portfolio of affiliates, joint ventures and alliances, ground operations in 43 countries and manufacturing operations in 8 countries. In 2011, Ranbaxy Global Consumer Health Care received the OTC Company of the year award. Sun Pharma + Ranbaxy = Profile of a New Global Leader Acquisition: Apr 06, 2014:To create world’s 5th largest specialty generic pharma company No. 1 pharma company in India with leadership position in 13 specialty segments No. 1 Indian pharma company in the US Over US$ 2 billion in sales Pipeline of 184 ANDAs including high-value FTFs No. 1 in generic dermatology, No. 3 in branded Approaching US$ 1 billion sales in high-growth emerging markets Expanding presence in Western Europe Transaction Highlights Sun Pharma to acquire Ranbaxy: Ranbaxy shareholders to get 0.8 shares of Sun Pharma stock for every share of Ranbaxy Deal size approximately US$ 4 billion; ~ 2.2x LTM sales US$ 250 million of revenue and operating synergies by 3rd year post close Daiichi Sankyo to become the second largest shareholder in Sun Pharma. Strategic Business relationship to continue with Sun Pharma Voting Agreements
- 3. Daiichi Sankyoto vote in favour of transaction (~63.5% ownership) Sun Pharma promoters to vote in favour of transaction (~63.7% ownership) Why Ranbaxy? Ranbaxy has got a lot of ANDA's (Abbreviated New Drug Application) approved for marketing in USA. Their problem is to find an API plant because main source of API was from Toansa. If Sun Pharma fills this gap, Ranbaxy can begin its export to the USA. So, Sun Pharma has got into this deal at the right time and deal has an upside for all the shareholders. Sun Pharma’s managing director Dilip Shanghvi has acquired a reputation for acquiring companies in trouble at a good price, and then turning around their operations Why Daiichi sold Ranbaxy? Daiichi faced criticism after Ranbaxy’s plants came under the US Food and Drug Administration’s (FDA’s) Ranbaxy’s inability to overcome its FDA-related problems has put pressure on its promoters. With Sun Pharma acquiring Ranbaxy, Daiichi is relieved of the burden of managing Ranbaxy’s problems. It will hold a 9% stake in Sun Pharma, as a result of its current stake in Ranbaxy. Financial Strength:
- 4. India’s Largest PharmaCompany
- 5. Leadership in PrescriptionShare Problems to be faced by Sun Pharma: The deal, has also seen Sun assume $800 million of debt on Ranbaxy’s books, needs shareholder and regulatory clearances. Ranbaxy’s all four plants have been banned by the USFDA for violations of manufacturing norms. In 2013, the company agreed to pay USD 500 million fine after pleading guilty to felony charges over manufacturing and distribution of adulterated drugs in the US. Conclusion: That was the right time for Sun Pharma to buy Ranbaxy. Ranbaxy's problem with US Food and Drug Administration (FDA) cannot get more intense than they are already, things can only improve from now onwards. There will be tremendous synergy between the two companies when they are merged as single entity. It will be the largest Indian generic company and the fifth largest in the world. The merger will see Sun Pharma’s revenue jump by a healthy 40% but its operating profit will rise by a meagre 7.5%, based on pro forma 2013 financials. Its operating profit margin will decline from 44.1% to 29.2%. Thus, the merger will have a negative effect on its performance in the near term.
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