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Sun Pharma offers $4bn for Ranbaxy

Follows period of manufacturing problems at Daiichi-owned Indian generics company
Sun Pharma

India's Sun Pharmaceutical has made a $4bn bid to acquire troubled pharma company Ranbaxy and offer its current majority shareholder Daiichi Sankyo a partial exit.

Ranbaxy has been labouring for years to tackle manufacturing issues at four of its Indian production facilities, which have been banned from importing medicines and active pharmaceutical ingredients (APIs) into the US.

The first indications of the quality failures emerged just months after Daiichi Sankyo's $4.7bn deal for a two thirds share of the Indian firm, and resulted in a $500m fine by the US government last year.

Sun Pharma is proposing an all-stock deal that would create the largest pharma company in India - as well as the fifth-largest speciality generic drugmaker in the world after Teva, Sandoz, Actavis and Mylan - with Daiichi Sankyo retaining a 9 per cent stake of the new firm.

Daiichi Sankyo has already agreed to the deal, in which Ranbaxy shareholders will receive 0.8 shares of Sun Pharma for each share they currently hold. This represents an 18 per cent premium to Ranbaxy's average share price in the last 30 days.

Japan-based Daiichi has also agreed to cover any costs that could arise from a subpoena received by Ranbaxy from the US Attorney's Office recently related to its API manufacturing facility in Toansa.

The combined company would have annual revenues of around $4.2bn and operating profit of around $1.2bn, with a network of 47 manufacturing facilities, and potential to slash annual costs by $250m three years after the deal concludes.

Sun Pharma managing director Dilip Shanghvi said the merger would create a company with a broad portfolio of generic and branded medicines, strong positions in the US and Indian markets as well as almost $1bn in sales in high-growth emerging markets.

The deal still requires approval by Sun Pharma and Ranbaxy shareholders as well as antitrust clearance before it can proceed, and is expected to conclude by the end of 2014.

Post-closure, one of the key objectives will be the "remediation of manufacturing facilities utilising combined expertise," according to the two companies.

Sun Pharma has had its own problems with manufacturing compliance, however, with an FDA import alert in effect covering its Karkhadi cephalosporin facility.

Article by
Phil Taylor

7th April 2014

From: Sales, Regulatory



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