Daiichi Sankyo Co, a third largest Japanese pharmaceutical company with revenues of 880 billion yen, is set to acquire India's number one pharma company Ranbaxy Laboratories for a total consideration of US$ 4.6 billion in cash. Daiichi will acquire the entire promoters (Singh Family) holding at a price of Rs 737 per share. With this price the total capitalisation of Ranbaxy worked out to 8.5 billion dollars as against the current market capitalisation of 5 billion dollars.
According to analysts the deal will assist to consolidate their presence in the competitive pharma market. Both the companies are investing huge funds in developing R&D products. Ranbaxy recently announced its revenue projections of US$ 5 billion by 2012 and its position among the top 5 global generic companies. Though, Daiichi has projected some what gloomy picture regarding its working in the current year, it is a third largest company in Japan. It is de-merging its non-pharmaceutical business in the separate company to focus on pharma segment.
Considering the challenging conditions prevailing in the global pharmaceutical market, the consolidation activities of pharma players will strengthen their earnings. Once the integration will start functioning, the shareholders will get better returns.
Daiichi Sankyo has recorded consolidated net sales of Yen 880.1 billion (around Rs 35,400 crore) for the year ended March 2007 as against Yen 929.5 billion in the previous year, a de-growth of 5.3 per cent. Its net sales in Japan declined by 10.4 per cent to Yen 598.1 billion and its sales in North America moved down by 7.1 per cent to Yen 177.9 billion. The sales declined mainly due to demerging of its non-pharmaceutical business and changes in fiscal year-end at certain overseas subsidiaries. However, its net income went up by 24.3 per cent to Yen 97.6 billion from Yen 78.5 billion in the previous year.
Daiichi's R&D expenditure reached at Yen 163.4 billion in the fiscal year ended march 2008, down by 4.2 per cent. The ratio of R&D spending to sales was 18.6 per cent. The Group has focused its R&D investments in four designated therapeutic areas viz., thromobotic disorders, malignant neoplasm, diabetes mellitus, and autoimmune disorders/rheumatoid arthritis, where medical demand is higher.
The company projected decrease of 4.6 per cent in sales during FY2008 at Yen 840 billion and net profit by 18.1 per cent at Yen 80 billion mainly due to dmerging of its non-pharmaceutical business and change in accounting year of its subsidiary companies.
Ranbaxy's consolidated net sales for the year ended December 2007 increased by 13.9 per cent Rs 6982 crore (US$ 1.6 billion) from Rs 6132 crore in the previous year. Its net profit has taken a jump of 52 per cent to Rs 774 crore ($190 million) from Rs 510 crore. Its R&D expenditure increased by 8.4 per cent to Rs 395 crore. The company's cumulative ANDA fillings stood at 239 with 141 approvals as on December 31, 2007.