3/26/2015

SunPharmacompletesRanbaxydealLivemint

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FIRSTPUBLISHED:WED,MAR252015.0126PMIST

SunPharmacompletesRanbaxydeal

SLIDESHOW
WED,MAR252015.1145AM

Germanwingswreckage
recoveredintheAlps

DealsclosurecomesafterthereceiptofmultipleapprovalsRanbaxyshareswillstoptradingon
6April
P.R.Sanjai
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|SwarajSinghDhanjal
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MARKETINFO
RanbaxyLaboratoriesLtd.

ALSOREAD
SunPharmacompletes
Ranbaxydeal

SharesofSunPharmaroseasmuchas2.4%inintradaytradeonWednesday,while
thoseofRanbaxyjumped2.1%.Photo:HemantMishra/Mint

Mumbai:SunPharmaceuticalIndustriesLtd,Indiasmostvaluabledrug

close

SunPharmaRanbaxymerger:RBI
approvestransferofshares
SunPharmaceuticalIndustriesLtd.

maker,hascompletedthe$3.2billionacquisitionofRanbaxyLaboratories
Ltdafteralmostayearofnavigatingtheregulatorygauntlettocreatethe
worldsfifthbiggestgenericpharmaceuticalcompanybyrevenue.
Wewanttofocuson
growingfaster:Dilip
Shanghvi

Theclosureofthedeal,announcedon6Aprillastyear,willcreateanentity
withalmostRs
30,000croreincombinedannualrevenueandRs
.
2.5trillionin
.
marketvalue.
Dealclosurecameafterthereceiptofapprovalsfromauthoritiesincluding
thecourts,capitalmarketsregulatorandantitrustwatchdogsinIndiaand
theUS.

JustDialsharesridethe
Internetwave

SunPharmaandRanbaxyalsoovercameallegationsofinsidertradingthat

brieflycastuncertaintyoverthedealthatwillcreateIndiaslargestdrug
maker,withalocalmarketshareof10%.
BothhavealsofacedissuesovercompliancewiththeFoodandDrug
Administration,theUSdrugindustrywatchdog.
Alternativestrategyfor
awardingcoallinkagesby
30June:AnilSwarup

SunPharmamanagingdirectorDilipShanghvi,oneofIndiasrichestmen
withafortuneestimatedatmorethan$20billion,saidrestoringthe
confidenceofregulatorswouldbethecompanysmostimportantfocus.

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3/26/2015

SunPharmacompletesRanbaxydealLivemint
Ranbaxyhadsomeregulatoryproblemsinsomeofthemanufacturing
facilities,saidShanghvi.
Wearecommittedtoensurethatwewilldowhateverittakestobringback
theconfidenceoftheregulatorssothattheytrustwhatwedoandwhatwe
say,Shanghvisaid.
OnWednesday,sharesofSunPharmaceuticalsgained1.29%to
Rs
1,053.30onBSE.Ranbaxygained1.63%toRs
.
832.90onadaythe
.
benchmarkSensexshed0.2%to28,111.83points.
SharesofRanbaxyLaboratorieswillstoptradingontheBSEandNSEon6
Aprilwhenitisdelisted.
AseniorSunPharmaexecutivesaidonconditionofanonymitythat
Ranbaxyasabrandwilleventuallyceasetoexist,inlinewithSunPharmas
marketingstrategy.
WiththeRanbaxyacquisition,SunPharmajoinsthecluboftheworldstop
genericdrugmakersthatincludeTevaPharmaceuticalIndustriesLtd,
Sandoz Inc.andMylanNV.

Thecombinedentitysmanufacturingfootprintcoversfivecontinents,with
productssoldinover150countries.About40%ofitssalescomesfrom
Indiaandotheremergingmarkets,andithas45manufacturingplants.
(In)theUS,Europeandothermarkets,wehaveseveralproductsawaiting
regulatoryapprovals.Andaswegettheseapprovals,Ibelievethatwewill
growfasterthanthemarkets,Shanghvisaid.
SunPharmaestimates$250millionofsynergiesaccruingfromthemerger
inthreeyears.
Themergercreatesacombinedentitywhichhasmanagerialcapability
thatissignificantlygreaterthaneithercompanyalone,saidShanghvi.
SunPharmaagreedtoacquireRanbaxyfromJapansDaiichiSankyoCo.
Ltdfor$3.2billioninstockinadditiontoassuming$800millionofdebt.

SunPharmahasmadenearly20acquisitionssinceitsinceptionin
1983.
In2010,itacquiredamajoritystakeinIsraelbasedTaroPharmaceutical
Industries,amovethatmorethandoubleditsrevenueintheUSto$1.1

billionfrom$484million.
Withintwoyears,SunPharmaboughttwomoredrugmakersintheUS
DusaPharmaceuticalsInc.andthegenericbusinessofURLPharmaInc.
ApartfromIndiaandtheUS,SunPharmahasmanufacturingfacilitiesin
Israel,Mexico,Hungary,Canada,BangladeshandBrazil.
QualityissuesatRanbaxysUSdedicatedmanufacturingplantsinMohali,
DewasandPaontaSahibresultedintheUSFoodandDrugAdministration
(FDA)imposinganimportbanondrugsproducedatthesesites,hurting
salesintheUS,itsmostimportantmarket.
TheDewasandPaontaSahibfacilitieswerebannedin2008andthe
Mohaliplantin2013.
TheseniorSunPharmaexecutivecitedabovesaidbothSunPharmaand
Ranbaxyfacedproblemswithregulatoryauthorities.Indeed,problemplus
problemisproblemsquare.Butwewillhavetodealwithit.Wewillbe
focusingonclearingthesehurdlesinnextoneyear,thoughthereisno
timelinefixed,hesaid.
GivenSunPharmashistoryofturningaroundacquiredassetsinthepast,
thecompanyshouldbeabletosucceedwithitspurchaseofRanbaxy,
accordingtoSarabjitKourNangra,ananalystwithAngelBrokingPvt.Ltd.
However,inthenearterm,theacquisitionwilldilutethereportedreturnon

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3/26/2015

SunPharmacompletesRanbaxydealLivemint
equityfrom27.9%to27.5%infinancialyear2016,whichishealthy,given
thelowprofitabilityoftheacquiredcompanyanditwouldbeatthehigher
endofitspeers,whichhaveanROE(returnonequity)of1725%.The
operatingROE,whichexcludesthecashcomponent,willstillbehigherat
around41%,shesaid.
Shanghvihassetthreetopprioritiesforthecombinedentitytoachieve
100%compliancewithmanufacturingstandardsspecifiedbythe
regulators,toincreaseitsfocusonresearchanddevelopment(R&D)and
achievestrongbusinessgrowthacrosstheworld.
Currently,bothSunPharmaandRanbaxyinvestaround$250million
combinedinR&D.
Shanghvisaidthefirmislookingatinvestingcloseto67%ofourturnover
onR&D,whichwouldallowustoinvestcloseto$500millionayearon
R&D.
PharmabusinessislinkedwithsuccessinR&D,hesaid.

15

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SUNPHARMACEUTICAL RANBAXYLABORATORIES MERGER DILIPSHANGHVI GENERICS

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SunPharmacompletesRanbaxydealLivemint

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