This deal has taken the market by surprise, as Japanese Daiichi Sankyo-owned Ranbaxy is under intense scrutiny of the United States Food and Drug Administration for compliance lapses at four of its manufacturing facilities in India. Daiichi had bought Ranbaxy in 2008 says Sachin Karpe. The combined entity will have operations in 65 countries, 47 manufacturing facilities across five continents, generic products marketed globally, including 629 abbreviated new drug applications. The largest Indian companies by sales - Ranbaxy will benefit from the operational strength of Sun Pharma, largest Indian company by market capitalization. Sun Pharma due to its operational strength has as operating margin of close to 40% as compared to 10% operating margins of Ranbaxy.
Sun Pharma will benefit from strong OTC counter of Ranbaxy, its strong presence in the emerging market, where Sun does not have a significant present as of now. Besides, Ranbaxy has a strong drug pipeline, especially in the US markets, awaiting approvals, which also includes first to file drugs, which enjoy exclusivity for a certain time frame says Karpe.
According to PricewaterhouseCoopers, India's pharmaceutical industry, which supplies more than 20 percent of the world's generic drugs suffers from a lack of oversight including a severe shortage of regulatory inspectors. Sun Pharma is the ideal partner to help realize the full potential to participate in future value creation opportunities says the MD of Ranbaxy.
Ranbaxy's shareholders will participate in the value creation of the combined company through their ownership of Sun Pharma shares. Sun Pharma expects to realize revenue and operating synergies of $ 250 million by third year post closing of the transaction. These synergies are expected to result primarily from topline growth, efficient procurement and supply chain efficiencies. As part of the transaction, Sun Pharma intends to leverage the human capital that has supported both companies, in order to drive future growth.