Ranbaxy-Sun Pharma merger to create world's fifth-largest generic drug firm

With the merger of Ranbaxy Laboratories with Sun Pharma complete, India's richest entrepreneur Dilip Shanghvi has created the world's fifth-largest generic company after Teva, Sandoz, Mylan and Abbott. Ranbaxy Laboratories will cease to exit and will be delisted from the stock exchanges soon.

Shanghvi, the founder and promoter of Sun Pharma, outlined the growth strategy of the merged entity-with a turnover of Rs 27,856 crore at a press conference in Mumbai. It will help Sun Pharma, which spends over 6-7 per cent of its turnover annually on research and development (R&D), pump in more money to develop newer products. The combined entity will have 437 approved products in the US market with another 149 pending approval. The thrust will be on reviving Ranbaxy's R&D engine.

"Now Ranbaxy outsources about 40 per cent of its production and our aim will be to make this in-house over a period of time", says Shanghvi. The immediate aim of the management will be to win back the faith and trust of the US Food and Drug Administration-Ranbaxy's two plants are under its scanner.

While the management will 'try to improve the productivity of Ranbaxy sales executives with the right environment', many of Ranbaxy's top executives may not find a role in the combined entity.

Decisions on leadership changes will be announced in the coming weeks. Already, Shanghvi's son Alok has been assigned the task of leading the emerging markets business of the combined entity with a revenue of over $100 million. The idea is to make the merged entity grow above the market rate in key growth areas. The focus will be on the US, domestic and emerging markets.  

The plan is to make Ranbaxy a powerhouse of active pharmaceutical ingredients (APIs). "The idea is to become a low cost producer globally with high credibility", says Shanghvi.

"In terms of asset base, the combined entity will have operations in 65 countries, 47 manufacturing facilities across five continents, and a significant platform of specialty and generic products marketed globally, including more than 600 ANDAs (Abbreviated New Drug Applications)", says Sarabjit Kour Nangra, VP Research - Pharma, Angel Broking.

With adequate cash in hand, Sun will look at further expanding in markets like South Korea and Japan. "The real issue for us will be to have adequate management resources to handle such an acqusition immediately", says Shanghvi.