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Daiichi Sankyo To Buy Ranbaxy

Japanese provider of patented drugs muscles into generics

by Jean-François Tremblay
June 16, 2008 | APPEARED IN VOLUME 86, ISSUE 24

Credit: Ranbaxy
Singh (left) and Shoda shake hands after signing the takeover deal.
Credit: Ranbaxy
Singh (left) and Shoda shake hands after signing the takeover deal.

DAIICHI SANKYO, Japan's second largest pharmaceutical company, announced on June 11 that it will buy a majority stake in New Delhi-based Ranbaxy Laboratories, one of the world's largest generic drug producers. The deal, worth between $3.4 billion and $4.6 billion, values Ranbaxy at $8.5 billion overall.

Worldwide, few big drug companies operate major businesses in generic and patented pharmaceuticals, as Daiichi intends to do. Novartis, which owns the generics producer Sandoz, is the main exception.

The Singh family, which owns about one-third of Ranbaxy, will sell its shares to Daiichi for 31% more than the shares' closing price on India's National Stock Exchange the day before the announcement. Daiichi, through a public offer, will acquire additional shares in Ranbaxy until it owns 50.1% of the Indian firm.

At a press conference in Tokyo, Daiichi CEO Takashi Shoda said the acquisition will enhance Daiichi's presence in emerging markets in which Ranbaxy has a well-developed distribution network for generic drugs. With sales of $8.2 billion last year, Daiichi sells patented drugs to treat cardiovascular diseases, cancer, metabolic disorders, and infections.

At the same press conference, Ranbaxy CEO Malvinder Singh stressed that Japanese markets for generics offer huge opportunities. Singh will remain at the helm of Ranbaxy, which had sales last year of $1.6 billion, and will also participate in Daiichi's management.

The companies have put on hold Ranbaxy's plan to spin off its drug discovery activities into a separate company. In a joint statement, the firms stressed that the acquisition of Ranbaxy will enhance Daiichi's drug development capabilities in a cost-effective way. Ranbaxy employs 1,400 researchers in India.

Other Japanese drugmakers have also been busy making deals. Takeda Pharmaceutical announced in April that it would spend $8.8 billion to acquire Millennium Pharmaceuticals. At the end of last year, Eisai said it would spend $3.9 billion to acquire MGI Pharma.



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