In one of the biggest buy outs of any Indian company by an MNC, Japanese major Daiichi Sankyo has picked up the promoters - Malvinder Singh and Shivinder Singh's - 34.8% stake at Rs 737 per share in drugmaker Ranbaxy Labarotaries. ( Watch )
This means complete exit of Ranbaxy promoters from the company. However, the senior Singh (Malvinder Singh) is expected to continue to head the management for sometime.
The Japanese company will also make a mandatory open offer, as per the Indian laws, to buy an additional 20% stake in the company. According to sources, Daiichi Sankyo plans to hold a controlling 51% stake in the Indian company.
The deal represents a major foray into the field of generic drugs by Daiichi Sankyo and would be the latest in a string of large overseas acquisitions by Japanese drug makers.
Shares in Daiichi Sankyo, best known for its high blood pressure medication Benicar and the experimental blood thinner prasugrel, ended nearly 5 per cent higher on early reports of a deal while Ranbaxy's shares were also up.
The total transaction value is expected to be worth between $3.4 billion to $4.6 billion, the companies said in a statement.
"There's a global move to generics and Japan's a bit behind on this," Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management, said after reports of the deal.
"India is a large market but even more important is the fact that Ranbaxy operates in a number of other countries. That's the real merit," he said.
The deal follows Takeda Pharmaceutical Co Ltd's acquisition of US biotech firm Millennium Pharmaceuticals for more than $8 billion and Eisai Co Ltd's purchase of MGI Pharma Inc for $3.9 billion.
Both Millennium and MGI Pharma are strong in cancer medicines
In the domestic pharmaceutical industry, there was a time when no one wanted to take on Ranbaxy in the marketplace. Aggressive, ruthless and fast moving - Ranbaxy won all the big games. It had the most number of brands among local companies in the top 20 pharmaceutical products.
Even four years ago, no one would have predicted today’s endgame. Ranbaxy, fresh from clocking a record $1 billion in sales, had big plans for the developed markets like US and Europe.
It had set its sights on emulating the Israeli company Teva Pharmaceuticals, which is the only company in recent times to crack the code of selling off-patent medicines and launching its own research products in the US. Ranbaxy was clearly headed there.
So, to most analysts and consultants in the pharmaceutical industry, Ranbaxy’s sale to Japanese company Daichi comes as a rude shock.
As one of India’s earliest entrepreneurial companies to stop the march of multinational drug companies, does the sale mark an end of era in pharmaceutical industry.
Ranbaxy’s clout came from copying patent drugs of multinationals and launching them across in India through its vast sales network. In the early nineties, when multinational companies had 200-400 medical representatives, Ranbaxy had more than twice as many.
With lower manufacturing and selling costs, it ruled the roost. In 1989, it launched its best selling antibiotic Cifran at Rs 18 a tablet when multinationals were selling it at Rs 40 a tablet.
Cifran became an overnight hit, clocking sales of Rs 50 crore in two years, a record unheard of in those days. Though visionary managing director Parvinder Singh realized this model wouldn’t last for long and embarked on R&D, till the late nineties Ranbaxy made most of its money from the domestic market. Ranbaxy’s global foray, though made losses in the initial years, starting paying off in the first few years of this century.
But, in last three years, intense competition from local companies have whittled profits in US market, while its new drug research programme has not paid even after 20 years in existence.
At the same time, its clout in domestic market has also vanished. With patents act coming into force in 2005, Ranbaxy can no longer copy and launch new drugs in India. Several Indian firms like Wockhardt, Sun and Zydus Cadilla had mastered act making market place less profitable. The number of successful launches of drugs of Indian companies has fallen by 70% in the last two years.
Taken from TOI dated 12.06.2008
Shakti
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