After the completion of the merger process of Ranbaxy Labs with the Rs. 16,000 crore Sun Pharma, the merged entity will stand up as the largest Indian pharmaceutical company in the country. The success of merger will depend on effectively resolving quality issues with foreign regulators, focus on investments in research & development and tapping of upcoming opportunities with the expiration of patents. Besides, the management decision to realign employees, R&D activities, marketing and financial matters will also be crucial for its future outlook.
Considering the huge size of merger, Sun Pharma has appointed Mckinsey & Company to look into the restructuring of activities including regulatory issues, product portfolios, capacity utilisation, employees, field work and R&D investments.
Currently, the market capitalisation of Sun Pharma stood at Rs. 1,56,244 crore and that of Ranbaxy at Rs. 24,033 crore on Bombay Stock Exchange (BSE). The promoters of both the companies have strong shareholding of over 63 per cent in total equity capital and foreign financial institutional holding in Sun stood at 22.51 per cent and that in Ranbaxy stood at 12.42 per cent. Both the shares touched to yearly high level at Rs. 754.40 and Rs. 569.95 on July 22, 2014 on BSE.
The merged entity will emerge as No 1 Indian generic pharma company in the world with combined revenue of US$ 4 billion. The combination will extend a strong portfolio of specialty and generic products that will be marketed globally. Post-merger, the combined entity is expected to have a leadership position in the Indian pharma market with about 9.2 market share and with more than US$2 billion sales in US. Sun Pharma has an employees strength of 14,000 people and Ranbaxy has over 15,000 employees.
Sun Pharmaceutical is gearing up to emerge as a largest branded generic company of choice with merger of Ranabxy Labs. Before acquisition of Ranabxy the company acquired entire stake of Caraco Pharma, US in the year 1997, followed by Taro Pharmaceuticals, Israel (66 per cent holding subsidiary) in 2010, Dusa Pharma, US in 2012 and URL Pharma's generic business, US in 2013. It has established strong presence in US through its subsidiary Caraco Pharma. Sun Pharma has also established two joint ventures, one with Merck for emerging markets and one with Intrnexon to develop new class of therapeutics for ocular diseases for global markets.
The company has established 17 manufacturing facilities worldwide. Its six facilities are located in India and 5 are in US. Further, it has setup facilities one each in Canada, Brazil, Mexico, Hungary, Israel and Bangladesh. It has also setup 8 API manufacturing facilities located five in India, and one each in Israel, US, and Hungary. At present its market share stood at 5.4 per cent in India with introduction of 25-30 products every year in India.
Sun has established strong presence in key chronic therapy areas of neuro-psychiatry, cardiology, gastroenterology, orthopaedics and ophthalmology, besides, diabetology, respiratory, pain, cancer and gynaecology. Further, it offers over 150 bulk actives manufactured at approved sites. Its top ten brands viz., Pantocid, Gemer, Aztor, Pantocid-D, Susten, Glucored Group, Levipil, Istamet, Rozavel and Clopilet contribute more than 20 per cent to its revenues.
Though Sun Pharma has announced strong financial performance for the year ended March 2014, Ranbaxy received setback and incurred a net loss of Rs.1,085 crore in the 15 months period ended March 2014. The aggregate net sales of both companies improved by 23.6 per cent to Rs. 29,045 crore from Rs. 23,492 crore. However, aggregate net profit declined sharply by 45.7 per cent to Rs. 2119 crore from Rs. 3,905 crore on account of net loss of Ranbaxy.
The aggregate equity capital will be at Rs. 419 crore with bonus issue by Sun Pharma in the ratio of 1:1. As against this capital, their reserves increased to Rs. 21,684 crore as at the end of March 2014 from Rs. 18,758 crore in the previous year. Thus the aggregate net worth worked out to Rs. 22,103 crore as against Rs. 19,073 crore. Based on the financial performance for the year ended March 2014, the long-term and short-term borrowings increased to Rs. 8,884 crore from Rs. 5,045 crore. Their aggregate fixed assets increased by 8.1 per cent to Rs. 10,906 crore from Rs. 10,085 crore.
The aggregate R&D expenditure reached at Rs. 1,570 crore during 2013-14 from Rs. 1,153 crore in the previous year. Sun Pharma's cumulative ANDA filings reached at 478 and it received final approval for 344 ANDAs and that of Ranbaxy's filings reached at 271 ANDAs and it received approval for 185 ANDAs up to the end of March 2014. Sun Pharmaceutical, alongwith its subsidiaries, has four state-of-the-art R&D centers across the world with more than 800 scientists. Sun Pharma filed 356 DMFs/CEP and received 174 approvals upto the end of March 2014.
Ranbaxy had 65 inspections across 24 global sites/offices by 28 regulatory agencies in the 12 months period ended December 2013 and 15 inspections across 12 global sites by 12 different regulatory agencies during January-March 2014. The company has implemented several plans across all plants to calibrate and improve supplies. Its R&D is now focusing on creating differentiated products (DP).
Ranbaxy has established strong presence in Respiratory and Nutritionals with leading brands like Faringosept and Revital. It launched Esomeprazole tablet in Brazil in 2013 and other products like Meropenem injectable in UK and Germany, Desvenlafaxine capsules in USA, Pregabalin capsule and Donepepzil tablet in Canada, Atorvastatin tablet in Spain, Tramadol & paracetamol tablet in Canada and France and Montelukast tablet in France.
The company also launched Raciper D, Zelgor, Cepodem AZ, Sodox capsules and Nutrikit in India. Further it launched Paduden Forte in Romania, Sotret in Russia, Ridlip and Rosuvator in Poland and South Africa.
Its leading brands are Isotretinoin (Absorica), Ketorolac (Ketanov), Atorvastatin (Storvas, Lipogen, Ridlip), Ciprofloxacin (Cifran), Amoxicillin plus Clavulanic Acid (Moxclav, Enhancin, Ranclav and Ramoclav), Cephalexin (Sporidex), Amoxycillin (Mox), Levofloxacin (Loxof, Tavanic, Cravit, Eleflox) and Clarithromycin (Kalbax, Klarithran, Crixan).
Ranbaxy is setting up new facilities in Nigeria and Egypt which will enable the company to tap the emerging growth opportunities in the region. Nigeria facility is likely to commence commercial production from end of FY2015. The Egypt project was partly delayed due to political unrest in the country.
Thus, the merger of these two major Indian pharmaceutical companies will able to overcome stiff competition in the international market with focus on key therapies. The merged entity will be in a position to duplication of expenditure on R&D and cut cost of production in near future. This will strengthen its bottom line and investors may get better return.
Highlights of Sun Pharma and Ranabxy