India's Sun Pharmaceutical Industries Ltd (SUN.NS) has agreed to buy generic drugmaker Ranbaxy Laboratories Ltd (RANB.NS) for $3.2 billion, betting it can fix factory quality glitches that plagued the current owner, Japan's Daiichi Sankyo Co (4568.T), and got Ranbaxy India-made drugs barred from the United States.
The all-share transaction, the biggest pharmaceutical sector deal in the Asia-Pacific region this year, will create the world's fifth-largest maker of generic drugs. The acquisition comes as the pace of consolidation increases in a market primed for growth in the U.S. and emerging markets that could be worth $335 billion globally by 2017, according to Lucintel.
For Daiichi Sankyo, the deal marks a significant retreat and highlights the lingering quality problems facing India's drug industry. The value of the Japanese firm's investments in the country has been halved since it bought control of Ranbaxy in 2008.
The relatively rare purchase by a leading Indian company of a local rival creates the biggest generic drug business by sales in India
With combined revenue estimated at $4.2 billion. Under terms of the agreed deal, Ranbaxy shareholders will get 0.8 of a Sun Pharma share for each Ranbaxy share they own.
"This transaction helps us transition to our long-held ambition of becoming a successful Indian company in the global pharmaceutical space," Dilip Shanghvi, managing director of Sun Pharma, India's largest drugmaker by market value, said in a conference call with analysts. Including Ranbaxy debt, the overall value of the transaction is $4 billion. The deal comes against the backdrop of a slew of sanctions against Ranbaxy by the U.S. Food and Drug Administration (FDA) due to concerns about manufacturing processes at itsIndia plants.
The broader issue of the quality of drugmaking has become a major concern both inside India and across the industry. India is second only to Canada as a drug exporter to the United States, where it supplies about 40 percent of generic and over-the-counter drugs. The FDA, which last month called for more collaboration with the Indian regulator to improve drug quality, has banned imports from all the Indian plants of Ranbaxy over production quality lapses.
Read full article: India's Sun Pharma to buy struggling Ranbaxy for $3.2 billion