Daiichi Sankyo bought Ranbaxy for $4.6 billion in June 2008. This report studies the implications of the merger between Ranbaxy and Daiichi Sankyo, from an intellectual property as well as a market point of view. There are many critical events happening in international pharma market including the growing preference for generics, increasing dominance of emerging markets such as India, fast approaching patent expiry etc. Also, this deal involves 2 major players who are the largest among their respective markets.
Daiichi Sankyo Co. Ltd. acquired 34.8% of Ranbaxy Laboratories Ltd. from its promoters and increased its stake through preferential allotment, public offer and preferential issue of warrants to acquire a majority in Ranbaxy, i.e. at least 50.1%. After the acquisition, Ranbaxy operates as Daiichi Sankyo’s subsidiary but supposed to manage independently under the leadership of its current CEO & Managing Director Malvinder Singh. Mr. Singh left the company in 2009 with a 4.5 billion rupees severance package.
Daiichi Sankyo wanted to acquire a drug maker that specialized in generics after Japan eased its laws allowing sales of these cheaper versions of expensive drugs. The deal was a trendsetter in Indian market for future M&A deals. India's family-owned companies realized that it was not shameful to sell and profit from their businesses.
The main benefit for Daiichi Sankyo from the merger was Ranbaxy’s low-cost manufacturing infrastructure and supply chain strengths. Ranbaxy gained access to Daiichi Sankyo’s research and development expertise to advance its branded drugs business.
Daiichi Sankyo’s strength in proprietary medicine complements Ranbaxy’s leadership in the generics segment and both companies acquire a broader product base, therapeutic focus areas
and well distributed risks. Ranbaxy gains smoother access to and a strong foothold in the Japanese drug market.
The immediate benefit for Ranbaxy was that the deal freed up its debt. Also, Ranbaxy’s addition elevated Daiichi Sankyo’s position from #22 to #15 by market capitalization in the global pharmaceutical market.
1. A complementary business combination that provides sustainable growth by diversification that spans the full spectrum of the pharmaceutica l business. 2. An expanded global reach that enables leading market positions in both mature and emerging markets with proprietary and non-proprietary products. 3. Strong growth potential by effectively managing opportunities across the full pharmaceutical life-cycle. 4. Cost competitiveness by optimizing usage of R&D and manufacturing facilities of both companies, especially in India." 5. Respective presence of Daiichi Sankyo and Ranbaxy in the developed and emerging markets 6. Ranbaxy’s strengths in the 21 emerging generic drug markets allow Daiichi Sankyo to tap the potential of the generics business. 7. Ranbaxy’s branded drug development initiatives for the developed markets significantly boosted through this relationship. 8. Daiichi Sankyo able to reduce its reliance on only branded drugs and margin risks in mature markets and benefit from Ranbaxy’s strengths in generics to introduce generic versions of patent expired drugs, particularly in the Japanese market.
Daiichi Sankyo’s focus was to develop new drugs to fill the gaps and take advantage of Ranbaxy’s strong areas To overcome its current challenges in cost structure and supply chain To establish a management framework that would expedite synergies To reduce its exposure to branded drugs in a way that it can cover the impact of margin pressures on the business, especially in Japan In a global pharmaceutical industry making a shift towards generics and emerging market opportunities, Daiichi Sankyo’s acquisition...