Sun Pharma and Ranbaxy together will be stronger

Published: 8-Apr-2014

Each company brings its own strengths to the merger

With India's Sun Pharma offering US$3.2bn for ailing Ranbaxy, besides another $800m in debt, the combined entity of Sun Pharma and Ranbaxy is set to be much stronger, with each bringing their respective strengths to the table.

The merger ensures a new global leader, which would be the fifth largest global speciality generic pharmaceutical company, the leading pharma company in India, and also No. 1 in 13 speciality segments.

The deal also ensures that the new entity would be the leading Indian pharma company in the US market, with more than $2bn in sales.

Sun Pharma made 13 acquisitions between the late 1990s and 2012, starting with the purchase of Detroit-based Caraco Pharmaceutical Labs in 1997.

The same year, it bought a stake in two Indian drug firms – Tamilnadu Dadha Pharmaceuticals and MJ Pharmaceuticals.

In 2010 it acquired a majority stake in Israel-based Taro Pharmaceutical, which helped double its revenue in the US to $1.1bn from $484m.

Over the next two years, Sun Pharma bought two more firms in the US – Dusa Pharmaceuticals and the generic business of URL Pharma.

Sun Pharma and Ranbaxy combined would have operations in 65 countries

Sun Pharma has a track record of successfully turning around 16 of its acquisitions. Four acquisitions – of Bryan, Hungary, Able and Chattem – between 2005–2006 and 2008–2009, and the recent acquisitions of Taro, Dusa and URL have shown a remarkable turnaround.

In terms of asset base, Sun Pharma and Ranbaxy combined would have operations in 65 countries, with 47 manufacturing facilities across five continents. The new entity would also have a significant platform of speciality and generic products marketed globally, including 629 abbreviated new drug applications.

A pharmaceutical company is known by the number of abbreviated new drug applications (ANDAs) it files, and the higher the number of ANDAs, the better the firm's health.

Sun Pharma said the merged entity would have combined revenues at $4.2bn and EBITDA of $1.2bn.

Top 10

Sun Pharma's top 10 brands contribute 20% of India sales. These include its antiulcerant, proton pump inhibitor Pantocid; its oral antidiabetic Gemer; its cholesterol reducing agent Aztor; or Pantocid-D, a proton pump inhibitor.

In women's healthcare, Sun Pharma has Susten, while in oral antidiabetic it has the Glucored group. In the central nervous system (CNS) category, it has Levipil and antidiabetic Istamet. In the cardiovascular system (CVS) category, it has Rozavel and anticlotting agent Clopilet. All these brands occupy the top 10 slot for the firm.

Market strengths

Sun Pharma is an integrated generic manufacturer, with the flexibility for manufacture onshore as well as offshore. In terms of skincare, the company had received 94 approvals as of 31 December, 2013, and 84 in CNS, and 42 in CVS.

In the pain segment, the company received 29 approvals by the end of last year, and 21 in allergy, 18 in oncology, 10 in metabolism, six in the cough and cold segment and five in urology.

ANDA pipeline

As of December 2013, the company said it was awaiting abbreviated new drug applications (ANDAs) for 131 products (including 14 tentative approvals). Its ANDA pipeline has undergone a significant ramp up. The company has a pipeline of 184 ANDAs, including high value first to file (FTFs).

While Sun Pharma had 84 products pending (with nine tentative approvals), Caraco and URL had 24 products pending (with four tentative approvals).

On its own, Taro has 23 products pending (with one tentative approval). The company said Taro numbers were added from March 2011, and URL numbers from March 2013.

Sun Pharma's abbreviated new drug application pipeline has been a strong and steady one.

As of March 2011, while the company had 377 cumulative products filed, 225 were approved. A year later, the company had filed 397 cumulative products, of which 250 were approved.

By March 2013, the company had topped this with 449 cumulative products filed, of which 311 were approved. As of December 2013, the company had 468 cumulative products filed, of which 337 were approved.

In terms of revised guidance for FY14, the company said ANDAs for 25 products were to be filed.

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