Sun Pharma & Ranbaxy Acquisition

Presented By

M.V.SaiMahesh

K.S.Harsha Vardhan

Introduction: Pharmacy Sector

• The pharmaceutical industry develops, produces, and markets drugs or

pharmaceuticals licensed for use as medications. Pharmaceutical companies

are allowed to deal in generic or brand medications and medical devices.

• The Pharmaceutical industry has grown from mere US$o.3 billion turnover

in 1980 to 15 billion in 2012-2013.

• Globally, India ranks 3rd in terms of volume of production(10 per cent of

global share) and 14th largest by value. (1.5 per cent of global share)

• The reason for lower value share is the lowest cost of drugs in India ranging

from 5 to 50 per cent less as compared to developed countries.

Sun Pharma

• Established in 1983, listed since 1994 and headquartered in India, Sun

Pharma is an international, integrated, specialty pharmaceutical company.

• In India, the company is a leader in niche therapy areas of psychiatry,

neurology, cardiology, diabetology, gastroenterology, orthopedics and

ophthalmology.

• The company has strong skills in product development, process chemistry,

and manufacturing of complex dosage forms and APIs.

• The 2014 acquisition of Ranbaxy will make the company the largest pharma

company in India, the largest Indian pharma company in the US, and the 5th

largest specialty generic company globally.

Ranbaxy

• Ranbaxy Laboratories Limited is an Indian multinational pharmaceutical company

that was incorporated in India in 1961. The company went public in 1973 and

Japanese pharmaceutical company Daiichi Sankyo acquired a controlling share in

2008.

• Ranbaxy Limited is an integrated, research based, international pharmaceutical

company producing a wide range of quality, affordable generic medicines, trusted by

healthcare professionals and patients across geographies.

• Ranbaxy serves its customers in over 150 countries and has an expanding

international portfolio of affiliates, joint ventures and alliances, ground operations in

43 countries and manufacturing operations in 8 countries.

• In 2011, Ranbaxy Global Consumer Health Care received the OTC Company of the

year award.

Sun Pharma + Ranbaxy = Profile of a New Global Leader

Acquisition:

• Apr 06, 2014:To create world’s 5th largest specialty generic pharma

company

• No. 1 pharma company in India with leadership position in 13 specialty

segments

• No. 1 Indian pharma company in the US

• Over US$ 2 billion in sales

• Pipeline of 184 ANDAs including high-value FTFs

• No. 1 in generic dermatology, No. 3 in branded

• Approaching US$ 1 billion sales in high-growth emerging markets

• Expanding presence in Western Europe

Transaction Highlights

Sun Pharma to acquire Ranbaxy:

• Ranbaxy shareholders to get 0.8 shares of Sun Pharma stock for every share

of Ranbaxy

• Deal size approximately US$ 4 billion;~ 2.2x LTM sales

• US$ 250 million of revenue and operating synergies by 3rd year post close

• Daiichi Sankyo to become the second largest shareholder in Sun Pharma.

Strategic

• Business relationship to continue with Sun Pharma Voting Agreements

• Daiichi Sankyo to vote in favour of transaction (~63.5% ownership)

• Sun Pharma promoters to vote in favour of transaction (~63.7% ownership)

Why Ranbaxy?

• Ranbaxy has got a lot of ANDA's (Abbreviated New Drug Application) approved

for marketing in USA.

• If Sun Pharma fills this gap, Ranbaxy can begin its export to the USA. So,

Sun Pharma has got into this deal at the right time and deal has an upside for all

the shareholders.

• Sun Pharma’s managing director Dilip Shanghvi has acquired a reputation for

acquiring companies in trouble at a good price, and then turning around their

operations

Why Daiichi sold Ranbaxy?

• Daiichi faced criticism after Ranbaxy’s plants came under the US Food and Drug

Administration’s (FDA’s)

• Ranbaxy’s inability to overcome its FDA-related problems has put pressure on its

promoters.

• With Sun Pharma acquiring Ranbaxy, Daiichi is relieved of the burden of

managing Ranbaxy’s problems. It will hold a 9% stake in Sun Pharma, as a result

of its current stake in Ranbaxy.

Financial Strength:

India’s Largest Pharma Company

Leadership in Prescription Share

Problems to be faced by Sun Pharma:

• The deal, has also seen Sun assume $800 million of debt on Ranbaxy’s books,

needs shareholder and regulatory clearances.

• Ranbaxy’s all four plants have been banned by the USFDA for violations of

manufacturing norms. In 2013, the company agreed to pay USD 500 million fine

after pleading guilty to felony charges over manufacturing and distribution of

adulterated drugs in the US.

Conclusion:

• That was the right time for Sun Pharma to buy Ranbaxy. Ranbaxy's problem with US

Food and Drug Administration (FDA) cannot get more intense than they are already,

things can only improve from now onwards. There will be tremendous synergy between

the two companies when they are merged as single entity. It will be the largest Indian

generic company and the fifth largest in the world.

• The merger will see Sun Pharma’s revenue jump by a healthy 40% but its operating profit

will rise by a meagre 7.5%, based on pro forma 2013 financials. Its operating profit

margin will decline from 44.1% to 29.2%. Thus, the merger will have a negative effect on

its performance in the near term