- Sun Pharmaceutical’s announcement to acquire Ranbaxy Laboratories is seen as a big development for both pharmaceutical sector and for the global generic pharma industry. This could flag off a new trend of consolidation among large Indian pharmaceutical companies.
- For Sun, it gives it an enhanced presence in several new markets, adding many new products to their portfolio overnight. It is a matter of pride that an Indian company has acquired this company, signalling India’s global presence. In 2008, Daiichi paid the promoters Rs.746 per share, while this deal at Rs.457 per share and was very attractive deal for Sun.
- Increase in regulatory approvals has resulted in escalated costs of business in the sector, making its entry price very important.
- Cultural integration, and dealing with U.S. FDA (Food & Drug Administration) would be the biggest challenges for Sun as there is a trust deficit between Ranbaxy and the FDA.
- On the Bombay Stock Exchange (BSE) Sun Pharma shares closed higher by 2.68 % (Rs.15.35) at Rs.587.25 while Ranbaxy reacted after opening strong at Rs.505 to close trading at Rs.445.2, down 3.12 %.
- The deal will set up a domestic powerhouse with a combined market share in excess of 9 % in the domestic branded formulations space; this would provide a significant lead over the second-largest player’s market share, which would be less than 6 per cent.
- Sun’s specialities are cardio-vascular and oral anti-diabetes, while Ranbaxy has a hold over primary-care and OTC segments. In addition to size and benefits of scale, the domestic portfolios of the two companies complement each other well.