The condition of divestment of 7 products by antitrust regulator Competition Commission of India (CCI) for the merger of Sun Pharmaceutical Industries, a Rs.16,000 crore Indian pharma giant and Ranbaxy Laboratories, a Rs.13,000 crore plus subsidiary of Daiichi Sankyo Co of Japan, may have marginal impact on overall working of merger entity. The merger plan has received important approval for merger by CCI subject to the condition that the Sun would divest itself of six products and Ranbaxy one product within six months.
With minimum impact on annual revenue from divestment, both companies have agreed to divest these seven products. According to pharma analyst from broking firm, the divestment of product is not a major issue for future working, but the success of acquisition is depend on overcoming of quality problem faced with US FDA and other regulatory bodies by Ranbaxy. From the investors point of view, the merger will be beneficial as margins are going to improve.
Sun Pharma has to divest all products containing Tamsulosin plus Tolterodine, marketed and supplied under the Tamlet brand name, and all products containing Leuprorelin, marketed and supplied under the Lupride brand name. Similarly, Ranbaxy has to divest all products, containing Terlipresslin, Rosuvastatin plus Ezetimibe, Olanzapine plus Fluoxetine, Levosulpiride plus Esomeprazole and Olmesartan plus Amlodipine plus Hydroclorthiazide.
According to Surjit Pal, Pharma analyst from Prabhudas Lilladher, the divestment of 7 products will have minimum impact on overall working of merged entity. The total sales of these products worked out to around Rs.140 crore or one per cent of total sales in the first half of 2014-15. After divestment of these products, the merge entity will get funds and the merge entity can enter in these products after five years. So the final result of divestment of products will be minimum.”
Sun Pharma has acquired several companies like Caraco Pharmaceuticals, Taro Pharma, URL and DUSA during last few year. It has spread its wings in the several highly regulated countries and emerging markets with these acquisitions. It has established strong presence in chronic therapies like metabolic syndrome, diabetes, neurology and cardiology. Now it set to acquire Ranbaxy despite quality problems with US FDA for last few year.
For the first half ended September 2014, Ranbaxy's consolidated net sales improved by 4.8 per cent to Rs.5,590 crore from Rs.5,334 crore in the similar period of last year and that of Sun Pharma's sales improved by 13.1 per cent to Rs.8,677 crore from Rs.7,674 crore. Further, Ranbaxy and Sun Pharma posted net profit of Rs.292 crore and Rs.2,144 crore respectively.
Ranbaxy's equity capital stood at Rs.212 crore and Sun Pharma's at Rs.207 crore. Ranbaxy's full market capitalization worked out to Rs.1,37,800 crore and that of latter at Rs.1,75,847 crore on December 12, 2014. Their reserves and surplus stood at Rs.3,433 and Rs.21,801 crore respectively.