PERSONALITY DEVELOPMENT AND COMMUNIVATION

SKILL-III
(MINOR PROJECT REPORT)
ON

RANBAXY LABORATORIES
Submitted in partial fulfillment of the requirements
For the award of the degree of
BACHELOR OF BUSINESS ADMINISTRATION
To
Guru Gobind Singh Indraprastha University, Delhi
Under the Guidance of: Submitted by:
Mrs.
(Assist. Professor) BBA-III Sem.

Session 2015-18

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 To Whom It May Concern

I ……………., Enrollment No.:……………. from BBA III Semester, Shift:

Evening of the Tecnia Institute of Advanced Studies, Delhi hereby declare that
the Personality Development and Communication Skill-III (Minor Project report)
(BBA-209) entitled RANBAXY LABORATORIES is an original work based on
secondary data and the same has not been submitted to any institute for the award
of any other degree. A presentation of the Minor Project Report was made on
Ranbaxy Laboratories and the suggestions as approved by the faculty were duly
incorporated.

Date:

Signature of the Student:

Himanshi Aggarwal

Certified that the Personality Development and Communication Skill-III (Minor

Project report) submitted in partial fulfillment of Bachelor of Business
Administration (BBA) to be awarded by G.G.S.I.P University, Delhi by
………………., Enrollment No.:…………… has been completed under guidance
and is satisfactory.

Date:

Signature of the Guide

Mrs.

(Faculty Guide)

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 Acknowledgement
I take this opportunity to express my heartiest gratitude to Tecnia Institute of
Advanced Studies for permitting me to undertake this research and supporting
me during this research and otherwise also.

I would like to thank who not only played the role of my philosopher and guide
but also mentored me at every stage of my project work. I would like to extend
my hearty thanks to entire faculty members of BBA department for their constant
cooperation and support to take decision during the course of my research. I
would also like to thank my parents for their support and blessing without which
this project could not have been completed. Indeed I shall remain ever grateful to
them.

I am also thankful to college library and computer laboratory management staff

for their constant support.

The experience I gained during this research project is of immense importance in

the academically and more on professionally.

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 Content

S.No. Topic Page

No.
1 Certificate II
2 Acknowledgement III
3 Chapter 1: Introduction 4
4 Chapter 2: Vision, Mission, Objective
2.1 Vision 7
2.2 Mission 7-8
2.3 Objective of the study 9
5 Chapter 3: Milestones 10
3.1 Milestones Achieved 11
6 Chapter 4: Story 12
4.1 Journey of Ranbaxy Laboratories Ltd 12
4.2 Acquisition by Daiichi Sankyo 22
4.3 Acquisition by Sun Pharmaceuticals 22-23
7 Chapter 5: Roadblocks and Feasible Solutions 24-27
8 Chapter 6: Future projections 28-29
9 Chapter 7: Conclusions of the study 30
10 Chapter 8: Profession Outcome 31-32

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 INTRODUCTION
Overview of the Company

Ranbaxy Laboratories Limited (BSE: 500359) is an Indian

multinational pharmaceuticals 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. In 2014, Sun Pharma acquired the
entire 63.4% share of Ranbaxy making the conglomerate the world’s fifth largest
specialty generic pharma company.

As of 2013, Ranbaxy was exporting its products to 125 countries with ground
operations in 43 and manufacturing facilities in eight countries. In 2011, Ranbaxy
Global Consumer Health Care received the OTC Company of the year award. In
the 2012, 2013 and 2014 Brand Trust Reports, Ranbaxy was ranked 161st, 225th
and 184th respectively among India's most trusted brands.

Formation

Ranbaxy was started by Ranbir Singh and Gurbax Singh in 1937 as a distributor
for a Japanese company Shionogi. The name Ranbaxy is a portmanteau of the
names of its first owners Ranbir and Gurbax. Bhai Mohan Singh bought the
company in 1952 from his cousins Ranbir and Gurbax. After Bhai Mohan Singh's
son Parvinder Singh joined the company in 1967, the company saw an increase in
scale.

Acquisition by Daiichi-Sankyo

In June 2008, Daiichi-Sankyo acquired a 34.8% stake in Ranbaxy,[9][10] for a

value $2.4 billion. In November 2008, Daiichi-Sankyo completed the takeover of
the company from the founding Singh family in a deal worth $4.6 billion by
acquiring a 63.92% stake in Ranbaxy. Ranbaxy's Malvinder Singh remained as
CEO after the transaction.

The addition of Ranbaxy Laboratories extended Daiichi-Sankyo's operations, with

the combined company worth about US$30 billion.

In 2009 it was reported that former Novartis Senior Vice-President Yugal Sikri
would lead the India operations of Ranbaxy Laboratories.

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Acquisition by Sun Pharmaceutical

On 7 April 2014 India based Sun Pharmaceutical and Japan based Daiichi Sankyo
jointly announced the sale of the entire 63.4% share from Daiichi Sankyo to Sun
Pharmaceutical in a $4 billion all-share deal. Under these agreements,
shareholders of Ranbaxy, were to receive a 0.8 share of Sun Pharmaceutical for
each share of Ranbaxy. After this acquisition, the partner Daiichi-Sankyo was to
hold a stake of 9% in Sun Pharmaceutical. The combination of Sun Pharma and
Ranbaxy created the fifth-largest specialty generics company in the world and the
largest pharmaceutical company in India.

History of Ranbaxy Laboratories

 IN 1960: Shri. Surendar Singh started the Ranbaxy Laboratories (pvt.) ltd.

 IN 1973: RANBAXY pharmaceuticals ltd. Make an I.P.O. & set up a

multi-chemical plant in Mohali, Punjab.
 IN 1977: RANBAXY’s first joint venture was set up in Logas (Nigeria).

 IN 1988: It granted its first U.S.Patent for product,”Doxycyline”.

 IN 1992: It entered into an agreement with Eli Liily & co. of U.S.A. for
setting up a joint venture in India to market select Lilly products.

 IN 1995: It acquired “Ohm Laboratories Ltd.”, a manufacturing facility in

U.S.A. Then it becomes the wholly subsidiary of Ranbaxy.

 IN 2000: It acquired the German company Bayer’s Generic Business

(trading under the name of Basics.) and also entered into Brazil, the largest
Pharmaceuticals market in South Africa.

 IN 2001: Ranbaxy U.S.A. (the wholly subsidiary of R.L.L.) crossed sales

of US $ 100 million and become the fastest growing company in the U.S.

 IN 2003: Ranbaxy and Glaxo SmithKline Plc (GSK) enter into a global
alliance for drug discovery & development.

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 IN 2005: Ranbaxy made joint venture with Nippon Chemiphar in Japan
(known as Nihon Pharmaceuticals Industries Ltd.). This joint venture
launched the first product Vagseal for Diabetes.

 IN 2008: It redefined it’s business model and bring Daiichi Sankyo as a

majority partner to create strategic combination of an innovator and
Generic power house.

 IN 2009: Daiichi Sankyo and Ranbaxy announced reconstitution of

Ranbaxy executive leadership.

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 VISION, MISSION & OBJECTIVE
2.1 VISION
A Global Commitment towards Quality and Patients

The credo of ‘Quality and Patients First’ has become a way of life at Ranbaxy.
More than a philosophy to live and work by, it is a global commitment to offer
high quality, affordable pharmaceuticals to patients around the world. While
multiple initiatives have been rolled out in pursuit of this maxim, we truly believe
that quality means continuous improvement.

At Ranbaxy, there is a heightened focus on making quality and compliance the

hallmark of all our operations. We are resolute in our determination to live up to
the trust that our stakeholders across the globe have reposed in us and will strive
ceaselessly to enhance value for all stakeholders.

Company Description

Ranbaxy Laboratories Limited (Ranbaxy), India’s largest pharmaceutical

company, 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 today has a
presence in 23 of the top 25 pharmaceutical markets of the world. The Company
has a global footprint in 46 countries, world-class manufacturing facilities in 7
countries and serves customers in over 125 countries.

In June 2008, Ranbaxy entered into an alliance with one of the largest Japanese
innovator companies, Daiichi Sankyo Company Ltd., to create an innovator and
generic pharmaceutical powerhouse. The combined entity now ranks among the
top 20 pharmaceutical companies, globally. The transformational deal will place
Ranbaxy in a higher growth trajectory and it will emerge stronger in terms of its
global reach and in its capabilities in drug development and manufacturing.

2.1 MISSION
Ranbaxy’s mission is ‘To become a Research-based International
Pharmaceutical Company’. The Company is driven by its vision to ‘Achieve
significant business in proprietary prescription products by 2012 with a strong
presence in developed markets’.

Recognized as a leading manufacturer, Ranbaxy Malaysia was set up as a wholly

owned subsidiary in June 1984.

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With its excellent sales and marketing team, who are experienced and well versed
with the industry, the company today has strong brand recognition amongst the
General Practitioners, Government Hospitals and Retail Pharmacy sector. The
marketing and distribution of Ranbaxy’s products is also undertaken for Schwarz
Pharma and Desitin, Germany and Pharm science, Canada.

Products and Services

Using the finest R&D and Manufacturing facilities, Ranbaxy Laboratories

Limited manufactures and markets generic pharmaceuticals, value added generic
pharmaceuticals, branded generics, active Pharmaceuticals (API) and
intermediates. The Company remains focused on ascending the value chain in the
marketing of pharmaceutical substances and is determined to bring in increased
revenues from dosage forms sales.

Ranbaxy’s diverse product basket of over 5,000 SKUs available in over 125
countries worldwide encompasses a wide therapeutic mix covering a majority of
the chronic and acute segments. Healthcare trends project that the chronic
treatment segments will outpace the acute treatment segments, primarily driven
by a growing aging population and dominance of lifestyle diseases. Our robust
performance in Cardiovascular, Central Nervous System, Respiratory,
Dermatology, Orthopedics, Nutritionals and Urology segments, clearly indicates
that the Company has strengthened its presence in the fast-growing chronic and
lifestyle disease segments.

Top 10 Products (2009)

• Valacyclovir
• Simvastatin
• Co-Amoxyclav
• Ciprofloxacin and Combinations
• Amoxycillin and Combinations
• Isotretinoin
• Ketorolac Tromethamine
• Loratadine and Combinations
• Ginseng+Vitamins
• Cephalexin
• Atorvastatin and Combinations

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2.3 OBJECTIVE OF THE STUDY
Acquisition of Ranbaxy Laboratories has been a great business deal in the pharma
industries. In the being the Ranbaxy Laboratories Ltd, an Indian multinational
company’s growth was at its peak and very competitive also. Although Ranbaxy
did a commendable job in the pharmaceutical industries. The objective of the
study is to identify the following:

 To identify the merits and demerits of the acquisition of Ranbaxy

Laboratories by Sun Pharmaceuticals.

 To know about the company more.

 To know about the gain for the shareholders of the Ranbaxy

Laboratories Ltd after the acquisition of the company.

 To make others also know about the company’s share market and
growth.

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 Milestones
Ranbaxy Laboratories is India's largest pharmaceutical company incorporated in
1961. The company has a global footprint in 46 countries, world–class
manufacturing facilities in 7 countries and serves customers in over 125 countries.
Ranbaxy has world–class manufacturing facilities in 11 countries namely Brazil,
China, Ireland, India, Japan, Malaysia, Nigeria, Romania, South Africa, USA and
Vietnam.

Ranbaxy has its R & D centre that helps company to have long term competitive
advantage. It caters treatment to segment of diseases that includes Cardiovascular,
Central Nervous System, Respiratory, Dermatology, Orthopedics, Nutritionals
and Urology.

Ranbaxy's top 20 products, ranging from Anti–infectives to Dermatological,

account for revenues of over $600 Million. Using the finest R&D and
Manufacturing facilities, that manufactures and markets generic pharmaceuticals,
value added generic pharmaceuticals, branded generics, Active Pharmaceuticals
and intermediates (API).

In 2001 Ranbaxy entered consumer healthcare through launch of 4 brands Revital,

Pepfiz, Gesdyp & Garlic Pearls.

In 2004 launched its first herbal range of products through New Age Herbals
(NAH), with products offering remedies in categories of Cough & Cold (Olesan
Oil & Cough Syrups) and Appetite Stimulant (Eat Ease).

In 2005, another popular brand, Chericof – The complete cough formula was
introduced. During 2006, the business registered sales of $19 Million registering a
growth of 19%. Revital, the flagship brand continues to maintain leadership in its
segment.
It also produces molecules like Simvastatin, Ciprofloxacin, Amoxycillin,
Isotretinon and many more.

In April 2014 Sun Pharmaceutical Industries Ltd and Ranbaxy Laboratories Ltd
announced that they have entered into definitive agreements pursuant to which
Sun Pharma will acquire 100% of Ranbaxy in an all–stock transaction. Under
these agreements, Ranbaxy shareholders will receive 0.8 share of Sun Pharma for
each share of Ranbaxy. This exchange ratio represents an implied value of Rs 457
for each Ranbaxy share, a premium of 18% to Ranbaxy’s 30–day volume–
weighted average share price and a premium of 24.3% to Ranbaxy’s 60–day
volume–weighted average share price, in each case, as of the close of business on
April 4, 2014.

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3.1 Milestone achieved

• 2013 –Ranbaxy wins the ASSOCHAM Innovation Excellence Platinum Award

for SynriamTM, a new age cure for malaria.

• 2012 – Ranbaxy wins the 2012 Frost & Sullivan Malaysia Excellence Award for
being adjudged the Malaysian Pharmaceutical Company of the Year in the
Generics Drug Category.

•2012 Launch India's first New Chemical Entity (NCE), SynriamTM, a new age
cure for Malaria.

• 2011  Launch Atorvastatin, a generic version of the world’s largest selling

cholesterol lowering drug, in the US with 180–day market exclusivity.

• 2011 – Ranbaxy is felicitated with the New Jersey Business and Industry
Association Award for Excellence in the Business Expansion Category

• 2010 – Ranbaxy enters the Golden jublee year

• 2010– For the first time Ranbaxy delivered quarterly sales of over $500 million 

• 2010 Launch First–to–File (FTF) product Donepezil hydrochloride tablets 5 mg

and 10 mg with 180–day market exclusivity in the US Healthcare System

• 2009– Dailchi Sankyo and Ranbaxy announced reconstitution of Ranbaxy

executive leadership. Ranbaxy was acquired by Daiichi Sankyo through
acquisition of it 52.5% of the equity share capital.

• 2008– Ranbaxy partnered with Daiichi Sankyo Company to create a strategic

combination of an innovator and generic powerhouse

• 2007– Ranbaxy has signed new R&D agreement with GSK

• 2006–Ranbaxy acquires generic unbranded business of GSK in Italy & Spain

• 2006 –Ranbaxy acquires Terapia largest independent generic pharma company
in Romania for $ 324 million

• 2003 Ranbaxy receives The Economic Times award for corporate excellence for
‘The Company of the year’2002–03

• 2000 Ranbaxy acquires Bayers generic business in Germany. It has alliance with
Glaxo SmithKline for Drug discovery & clinical development

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 STORY/ HISTORY

4.1 Journey of Ranbaxy Laboratories Ltd

Indian pharmaceutical industry was worth of $ 8 billion in 2006 and had been
growing at an average rate of 8–9 %. The industry was highly fragmented with
more than 20,000 registered units and 30% of market was controlled by top ten
companies and the rest of 70% by small companies. The Global pharmaceutical
industry was estimated at $ 600 billion in 2006. Indian pharmaceutical industry
has become more innovative and enterprising with more investment in R&D
especially since the WTO agreement was signed.

Ranbaxy Laboratories Ltd. was India’s largest pharmaceutical company with

revenue of US $ 260 million in the domestic market and $ 1.3 billion in the global
market in 2006. In the domestic market Ranbaxy enjoyed a share of 5.1% with
nine brands in the Top 100 list in 2006. It is one of the largest ANDA
(Abbreviated New Drug Application) filers with US FDA ( United States Food
and Drug Administration). The company’s offices have spread over 49 countries
with employment of 12,000. It is one of the ten generics players in the world.
Three-forth of Ranbaxy’s revenue comes from international sales, with the US
alone accounting for almost one third. The range of products covers a wide band
of therapies with a total over 5000 SKUs (Stock Keep Units) globally.

Ranbaxy’s vision was “To become a research based international pharmaceutical

company”.

Ranbaxy Laboratories Limited

Ranbaxy was founded by Ranjit Singh and Dr. Gubax Singh in Amristsar to
distribute Vitamin A and anti-tuberculosis drugs to Japanese Pharmaceutical
companies in 1937. The company set up a manufacturing unit in Okahla in 1961,
in collaboration with Lepatit, an Italian Pharmaceutical company to produce the
patented drug chlorophenicol for typhoid. Later Ranbaxy bought the company in
1967. The company went public in 1973 to establish an Active Pharmaceutical
Ingredients (API) manufacturing plant at Mohali, Punjab. When Drug Price
Control Order (DPCO) was enacted in India in 1970, the prices of all drugs were
stipulated by the Government. As a result, the prices had fallen for all drugs. The
company had then started exporting bulk drugs (APIs) to Malaysia, Thailand,
Srilanka, Middle-East and Singapore in 1975. In Malaysia, it established a joint
venture to manufacture and distribution of formulations. API plant was set up to
manufacture antibiotics/antibacterial at Taonsa in India in 1987.

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Parvinder Singh (1993-1999)
Ranbaxy Pharmaceutical Ltd had remained as a small company under Bhai
Mohan Singh till 1990. Parvinder Singh wrested the control of the company from
his father Bhai Mohan singh in 1993. He was a doctorate in chemistry from the
University of Michigan. He joined the company to help his father in 1967. He was
a visionary and a forward looking CEO. When Indian Patent Act (1970) came into
exist in India, Parvender Singh exploited the opportunities of new patent act to
manufacture formulations and generics. The act abolished the product patents for
all pharmaceutical and agricultural products and process patents were permitted
for 5-7 years. He had invested heavily in setting up a plant in Mohali to
manufacture bulk drugs.

Parvinder Singh was always ahead of others in the industry. He wanted to make
Ranbaxy a global company. He adopted global strategy through acquisition in US,
UK and India. He set up a state-of-the-art Research and Development Centre at
Gurgaon, India. R & D acted as an engine of growth for the company. In the R &
D Centre, he established Chemical Research, Pharmaceutical Research,
Fermentation Research, Novel Drug Delivery System (NDDS), and New Drug
Discovery Research (NDDR). The company focused on Urology, anti-infective,
respiratory, anti-inflammatory and metabolic disorders segments.

Bhai Mohan Singh’s initial strategy was to focus on Active Pharmaceutical

Ingredients (API).When Parvinder Singh took over the reign, the strategy was
shifted to manufacture generics which were off-patents drugs. Parvinder Singh
made far reaching changes in the company. He introduced management by self
control in the company to facilitate all members of the company to participate in
the decision making process. He abandoned top-down policy pursued by his
father Bhai Mohan Singh. He set up a stretch target of sales of US $ 1 billion to
be achieved by 2004. Ranbaxy set up a joint venture with Eli Lilly with 50-50
partnership to manufacture products of international quality in India in 1993. The
joint venture manufactured Lily’s products and marketed in India, Sri Lanka and
Nepal. Ranbaxy was benefited in terms of technology and Eli lilly got the
advantage of low cost manufacturing.

Parvinder Singh looked forward to set up international business in USA, UK, and
Latin American countries. He has adopted global strategy through joint ventures
and acquisition to achieve sustainable growth. He formed a joint venture Ranbaxy
Guangzhou China Ltd (RGCL) in China in 1993 and started manufacturing bulk
drugs and formulations in 1995 ( see Table 7). The joint venture manufactured
antibiotics, analgesics, cardiovascular and other drugs and marketed all over
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China. Later Ranbaxy has increased its stake in RGCL to 70%. Its brand cefran
was the market leader in China. It acquired Thai Pharmaceutical Company
Unicher in 1995 and formed Ranbaxy Unicher Co. Ltd (RUCL). RUCL was
importing more than 50% of the products manufactured in India. It has a strong
presence in Antiinfectives, Haematinics, Cardiovasculars, Nutritional & GI Tract
segment in Thailand and India. Parvinder Singh established a global alliance with
Eli Lilly to manufacture and market cefactor in US in 1994. The joint venture
helped Eli Lilly to increase its market share of cefactor in USA whereas Ranbaxy
was befitted in acquaintance of stringent regulatory requirements of Food and
Drugs Administration (FDA) in the USA. Ranbaxy sourced cheap cefactor
intermediates to Eli Lilly and Eli Lily in turn marketed cofactor as branded
product. Ranbaxy has entered the US market and operated through two
subsidiaries Ranbaxy Pharmaceutical Inc( RPI) and Ohm Laborataries Inc, the
over the counter drug manufacturer in 1995 ( Table 7). Ohm Laboratory had
exceptional FDA approval record. There was immense opportunity to sell
generics in Europe. European market is attractive because of aging population and
high health costs forcing the goods to open the generics market. Parvinder Singh
wanted to exploit huge potential in Europe and keeping that in mind, he set up a
subsidiary namely Ranbaxy UK Ltd to sell its branded products in 1996. He
acquired another company Rima Pharmaceuticals, the semisynthetic pencillins
maker to sell generics products in Europe. His basic strategy was to keep the
acquired units as profit centres which helped Ranbaxy to keep acquired firms self
sufficient. Also the acquisition process did not adversely affect the managerial
culture, openness, self motivation and positive attitude. The acquired centre was
given full responsibility of profit and loss of the company. The regional managers
were given high degree of autonomy. He had adopted three tier organizational
structures. The first tier consisted of senior managers and second tier regional
managers and the third country managers.

In 1990s, Ranbaxy’s effort was to sell formulations under its own brand name. It
wanted to move up from low-margin bulk pharmaceuticals to high margin
branded formulations. The major markets for branded generics are Russia, China
and other developing countries. However, in US and UK, Ranbaxy focused on
formulations rather than branded products because of stiff competition from other
major players in branded generics. In UK, Ranbaxy was successful to market
branded formulations as it has received approval from Medicines Control Agency
(MCA) for many branded generics. Ranbaxy’s manufacturing strength has been
established in the field of process development, scaling up and commercialization
of APIs, world class generics, and branded generics.

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It set up world class manufacturing facilities in seven countries viz. India, China,
Ireland , Malaysia, Nigeria, US and Vietnam. In Malaysia it set up Ranbaxy
Malaysia Sdn Bhd (RMSB) as a joint venture between Ranbaxy and Malaysian
shareholders in 1984. A manufacturing unit was set up in Sungai Petani, Kedah to
cater the need of Malaysia and Singapore market. Later it has increased its stake
in RNSB to 55%. Ranbaxy’s Manufacturing facilities were approved and audited
by international regulatory agencies like US FDA, UK MCA, South Africa MCC,
and Australia TGA.

Parvinder Singh made significant value addition to products efficacy or delivery

in its NDDS program. For example, the company made a significant improvement
to ciprofloxacin, a Bayer patented drug which cut the required dosage to once a
day against several times a day as needed for Bayer’s drug. It later out-licensed
the technology to Bayer for $ 65 million and also earned royalties on resulting
sales. Ranbaxy has come up with three new chemical entities (NCEs) in the area
of asthma, urology and malaria. These were at various stages of clinical
development. One entity for malaria has entered Phase II of clinical trials. The
molecule was aimed at mainly for the under developing countries. In 2002, it had
out-licensed a NCE, codenamed RBx2258 (for treating the enlargement of the
prostate gland in people above 50 years), to Germany’s Schwarz Pharma for
further development and clinical trials. But Schwarz Pharma had to abandon trials
in late phase II due to a lack of desired results, measured in terms of safety,
efficacy, and superiority.

Ranbaxy’s international operations were spread over four regions viz. India and
Middle East; Europe, CSI, and Africa; Asia-Pacific and Latin America and North
America. Parminder Singh set up manufacturing facilities in each region to
manufacture drugs at low cost.

The company has changed its financial year to January- December from April-
March with effect from January 1999.The company dropped those products the
sales of which yielded low margins. It rationalized the whole product portfolio in
domestic and foreign market to achieve the target of US$ 1 billion by 2004.

Devinder Singh Brar (1999-2004)

Paravinder Singh died of cancer in July 1999. Before his death, he established a
strong base for the company. Devinder Singh Brar was appointed as CEO and
Managing Director by Bhai Mohan Singh, Parvinder Singh’s 80 year old father in
1999. Bhai Mohan Singh did not consider Paravinder Singh’s son Malvinder
Mohan Singh for CEO as Malvinder Singh was very young and did not have
maturity to become CEO of the company. Bhai Mohan Singh commented after
15
the appointment of D S Brar as CEO, “Brar will ensure the professionalism
inculcated in the company by Parvinder Singh and take the company to new
heights”.

D S Brar has envisioned ‘Vision Garuda’ of achieving a target revenue of US $ 5

billion by 2012, 70% of revenue should come from International business. He
wanted to reiterate Ranbaxy “a research based international pharmaceutical
company”. He continued to follow the global strategy of Parvinder Singh. His
first acquisition was German generic business Bayer in 2000.

D S Brar took a major decision to pull out of its Indian joint venture with Eli
Lilly. He felt that Eli Lilly’s 50-50 partnership was no longer required for the
production of the drugs in India. He argued that Ranbaxy has come of age and
could manufacture and market quality product independently in Indian and
overseas market. D S Brar found that there was a huge market potential for anti-
AIDS drugs in India. There were 3.7 million HIV positive patients in India.
Ranbaxy wanted to launch anti-AIDS drugs lamivudine, nevirapine, abacavir and
indinavir in the Indian market. The market was dominated by Cipla and
GlaxoSmithcline who did aggressive marketing for the drug. He used low cost
manufacturing facilities to manufacture the anti-AIDS drugs and sold directly to
consumers to capture the market. The company entered Consumer Healthcare
which was thriving business in India. The company launched four brands viz.
Revital, Pepfiz, Garlic Pearl and Gesdyp. The business turnover of these products
was Rs. 552 million in 2003.

D S Brar launched generic blockbuster antibiotic Augmentin in the U S Market in

January 2002. It has garnered a market share of only 1% against a market share of
80 % enjoyed by Geneva Pharmaceuticals of Switzerlands and Tava of Israel.
Ranbaxy Branded Products Division, a marketing arm of Ranbaxy which
marketed exclusive company owned branded products had launched another
branded generic product Sotret, the company’s brand for Isotretinoin capsule in
the U S market which has market size of US $ 540 million. Ranbaxy gained a
market share of 8% for Sotret. It had also got approval from US FDA to make and
sell a generic version of Pfizer’s antifungal drug Diflucan. Its another product
Ceftin accounted one third of Ranbaxy’s total sales in U S.

During 2003, Ranbaxy’s business operations in the US had widened with revenue
of US $ 412 million, representing 42% of the company’s global turnover. The
company had obtained 24 approvals from US FDA in 2003. The company
received US FDA approval for manufacture and maketing of Isotretinoin of 30
mg strength in June 2003. This was not available to generic players and even the
16
originator itself. The US market for Isotretinoin was $ 6 million in 2003. The
company acquired the generics business of RPG Aventis Life Sciences in France
to increase the market in Europe.

D S Brar identified two focus areas viz. New Drug Discovery Research ( NDDR)
and alliance management as the key growth engines in R & D. He made an
alignment with Geneva-based Medicines for Malaria Venture (MMV) and
developed synthetic peroxide anti-malarial drug RBx 11160. Ranbaxy
Laborataries and GlaxoSmithKline Plc (GSK) have entered into collaboration for
drug discovery and clinical development covering a wide range of therapeutic
areas. Ranbaxy would be responsible for activities from optimization of lead
components to generation of a development candidate. Once a compound has
been selected as development candidates, GSK would complete the development.
GSK has also got the responsibility of commercialization of the product.

Brian W Tempest (2004-2005)

D S Brar exit in July 2004 after completing his five year tenure and Dr. Brian W
Tempest (57 years) was appointed as CEO and MD from July 05, 2004 to
December 31, 2007. He was a doctorate in Chemistry from Lancaster University.
Tempest has 32 years of experience with 4-5 companies such as Glaxco Holidays,
G D Searle, Becham and Fisons. He was more of a operations person rather than a
strategist and visionary. Tempest followed the path of D S Brar. After taking over
as CEO, Tempest said, “I feel immense pride and honour to lead Ranbaxy,
Ranbaxy had signed another collaborative Research agreement with Avestha
Gengraine Technologies Pvt Ltd (Avesthagen) in the area of NDDR. Avesthagen
was the first India’s discovery based bio-technology and bioinformatics company.
Dr. Patell, Founder and CEO, Avesthagen commended on the collaboration,
“Avesthagen’s vision has been to promote new drug discovery and support and
enable our Indian Pharma companies to reach and address the needs of the people
of the global markets. We are glad to partner with Ranbaxy in ths endeour and
look forward to a very fruitful relationship” 5 . Dr. Kasim Mookhtiar, Vice
President NDDR, R & D Ranbaxy said, “With the rapid growth of new drug
discovery research at Ranbaxy, opportunities exist for collaborative work. We are
glad to avail of Avesthagen’s quality R & D services in cutting edge technology
to augment our capacity so that our current needs can be met in a timely manner”
6 The company wanted to climb up the value chain to increase revenues from
dosage forms sales. Dosage forms marketing operations are structured through
India; Europe, CIS, Africa; Asia Pacific, Latin America & Canada; North
America, The Middle East. Dr. Rasmi Barbhaiya, R & D President said “This

17
collaboration provides an avenue to Ranbaxy to leverage its discovery and early
product development strengths and gain access to cutting edge technologies”

Dr. Rashmi Barbhaiya, President, R & D who had held this position since April
15, 2002, left the company in 2003. Dr Tempest himself took charge of R & D
with separate heads for NDDR and NDDS and generic Drugs Developments
reporting to him directly. The company spent US $ 75 million in R & D in 2004,
showing an increase of 43%. The sales of company was the highest in USA (US$
426 million) followed by BRIC countries (US$ 305 million) and Europe (US$
192 million) in 2004 (Exhibit 1). The company invested in training and
development needs of its employees through tailor made programmes and
extensive workshops. There is a formal mechanism to reward employees for new
ideas. It has launched a project called CRUSOE that works on improving
operational efficiencies. Under this project, employee’s suggestions are not only
captured, but encouraged via contests. Brian Tempest used to spend two-three
days in a week visiting labs and talking to scientists.

By February 2004, Ranbaxy crossed US $ 1 billion in revenues. Ranbaxy was the

third largest filer of ANDAs (150) with US FDA in 2004. He focused four disease
segments viz. Infection, Urology, Inflammation/ Respiratory and Metabolic
disorders in his New Chemical Entities (NCE) pipeline. In Urology segment in
India, Ranbaxy is leader and enjoyed a market share of 12.5% in 2006.
Commenting on the company’s performance in Urology segment, Sanjeev I Dani,
Senior Vice President and Regional Director- Asia and CIS Ranbaxy said,
“Ranbaxy has identified Urology as a focus area and as result launched superior
therapeutic options for the specialists ……. Our dedicated and well trained
Urology team helps deliver prompt therapeutic solutions to the Urologists and
supporting specialists” 8 . During the first half of 2007, the company launched
three NDDS based formulations viz. Niftran, Eligard and Roliflo.

With India becoming signatory to the WTO and introduction of the Patent Product
regime, the Indian market will be an attractive option for introduction of research-
based products. In the new patent regime, only strong players in terms of research
and technical capabilities can survive. Malvinder Singh, Regional Director -India
Region of the company was appointed as an additional Director of the company
with effect from January 1, 2004 and number two in the company. Tempest had
lent his support to Malvinder Singh in his India business. Malvinder Singh wanted
to enhance the business in India. He has rationalized the product portfolio and
focused on speciality-oriented therapies. Expressing his delight at this
development, Sanjeev Dani, Senior Vice President & Regional Director, Asia &
CIS, Ranbaxy, said, “We have restructured our domestic operations to focus on
18
high growth segments. Due to our strong marketing capabilities coupled with new
product successes, our performance has been buoyant in recent years. It has
culminated into rapid market share gains and now with the number one position in
the domestic market, we intend to secure this leadership position in the coming
months and years through attracting human resources & retaining talent. In-
licensing and launching innovative products remain our prime focus areas” 10. He
understood that in order to be competitive, a company needs to be strong in the
domestic market. He ensured right doctors to be covered by sales representatives.
The coverage ratio has gone up from 30% to 70%. He improved fiscal discipline
in the company. Malavinder Singh who joined the company in 1998 had worked
in different projects such as Information Technology, generics, lifecycle brands
and global licensing.

Malvinder Mohan Singh (2005-2008 )

Tempest retired in June 2005 and Malvinder Mohan Singh became CEO and
MD. Like his father, Malvinder Mohan Singh also wanted to take Ranbaxy to a
new height. His strategy was to focus on US, Europe, and emerging markets. It
has a market share of 42% in the developed countries. Its market was growing at
the rate of 31% in USA in 2006. He bought a US midsized generic company
Mutual Pharmaceuticals for US $ 300 million and five other global companies.
He had taken shareholder’s approval to raise US$ 1.5 billion in equity and US $
1.2 billion in debt. He raised another US $ 440 million through a Foreign
Currency Convertible Bond (FCCB) offering.

Malvinder Mohan Singh acquired Terapia S.A in Romania to serve the European
market efficiently and cost effectively in 2006. After the acquisition, it was
renamed as Terapia Ranbaxy and became the largest generic player in Romania.
The combine sale was US $ 80 million in 2006. On the completion of the
transaction, Malvinder Singh said, “Romania now becomes the third largest
market for us in terms of revenue. We are committed to developing our operation
here as strategic hub for Europe and the CIS. We will continue to fortfy our global
presence, particularly in our key geographies”.

Expressing his delight with progress of the company, Peter Burema, President,
Global Pharmaceutical Business, said, “Our combined market share, in terms of
volume exceeds 10%. This means that one out of every ten medicine packs being
sold in Romania is currently being manufactured by Terapia Ranbaxy”. Ranbaxy
can take advantage of Terapia’s strong R&D and manufacturing infrastructure as
also their highly skilled senior management team. He acquired another Be-Tabs of
South Africa for US $ 70 million in 2006. Malvinder Singh after the acquisition
of Be-Tabs said, “The acquisition results in considerable synergies and further
19
strengthen Ranbaxy’s foothold in South Africa. It reinforces our position by
expanding our portfolio in a key market that is exhibiting strong growth potential.
The move will help us to provide effective disease management solutions in
support of the government/s objective to make health care affordable to a wider
cross-section of the population”. The company made nine mergers and acquisition
amounting to a value of US 450 million to expand its presence in emerging and
profitable markets such as Romania and South Africa in 2006. The company’s
return of net worth was 13.2% in 2006. The company made an impressive
performance by increasing its sale to US $ 40.6 billion in 2006. It made a net
profit of US $ 3.8 billion in 2006.

Ranbaxy is vertically integrated in production and research. To strengthen the

vertical integration capabilities and fermentation capacities, it acquired Cardinal
drugs, an API manufacturer at Malanpur near Gwalior and a strategic stake of
15% in Kerbs Biotechnicals in India and Jupital Biosciences Ltd, a company
specializing in the development and manufacture of peptitude products. Ranbaxy
entered the fast growing Oncology therapeutic segment in the NDDR agenda. It
had a partnership with Zenotech Laboratory Ltd in India to strengthen oncology
therapy and bio-generics in 2007. It had marketed 11 oncology products as
generic formulations in the US and Canada. “Having worked with Zenotech for
almost two years, we believe that this investment and partnership provides a
strong platform for us to leverage these opportunities” 14 Malvinder Singh said.

Malvinder Singh’s strategy was to focuss on out-licensing, in-licensing and

NDDS. He outlicensed Ranbaxy’s Statin molecule to Pharmaceutical Product
Development Inc (PPD), a leading contract research organization. PPD will have
an exclusive worldwide licence to develop, manufacture and market Ranbaxy’s
Statin for the treatment of dyslipidemia, chlolestrol lowering drugs account for $
32.4 billion in sales for 200515. The company also received a milestone payment
from PPD Inc for the completion of the Phase I clinical studies. Ranbaxy
launched blockbuster anti-cholesteremic Simvastalin 80 mg and Pravastatin 80
mg in the US market with a 180 days marketing exclusivity which has captured
56% market share during 180 days exclusivity period in 2006. In the post
exclusivity period, the company launched 5, 10, 20, 40 mg strength of
Simvastatin. The company also launched the first Atorvastatin under the brand
name Storvas in Malaysia. The success of Sotret 30 mg led to growth in the
overall prescription market share for the product from 21% to 25.5 % in 2006.

As of December 2006, Ranbaxy holds US FDA approvals for 121 ANDAs and 76
ANDAs are pending for approvals. During 2006, Ranbaxy received 10 approvals
and filed 28 ANDAs including 1 PEPFAR (The US President’s Emergency Plan
20
for AIDS Relief) ANDA for approval by the US FDA. Malvinder Singh
continued to focus on NDDS and in-licensing as strategic areas for future growth
of the company. NDDS has developed proprietary “platform technologies” and
contributed 9% to the turnover of Indian business. The in-licensing products were
Synasma (Doxophylline) and Trambax ( Tramadol Flash Tabs). In 2006, Ranbaxy
entered into an agreement with Senetek PLC, to purchase patents, trademarks and
automated manufacturing equipments for proprietary disposable auto-injector
technology.

Global Consumer Healthcare registered a sales of US $ 35 million globally and

US $ 19 million in India. Revital is a powerful brand of Ranbaxy which has a
market share of 72% in India. Ranbaxy had a strong Internal Audit function with
accreditation of ISO 9001-2000 certificate. The Audit function is headed by Vice
President who reports directly to the CEO and the Audit Committee.

Global Consumer Healthcare registered a sales of US $ 35 million globally and

US $ 19 million in India. Revital is a powerful brand of Ranbaxy which has a
market share of 72% in India.

Ranbaxy had a strong Internal Audit function with accreditation of ISO 9001-
2000 certificate. The Audit function is headed by Vice President who reports
directly to the CEO and the Audit Committee.

Ranbaxy set up a Global Quality Assurance team which ensures quality

manufacturing process across all locations.

Malvinder Singh gave the strategic direction for the company to move from the
generics to New Drug Delivery System (NDDS) to New Drug Discovery
Research (NDDR). Under NDDR mission, he wanted to discover and develop
novel therapies that meet large unmet medical needs and transform Ranbaxy into
a respected international research based pharmaceutical company. Ranbaxy has
spent Rs. 428 crore on R&D in 2007 to move up to the value chain.

4.2 Acquisition by Daiichi (2008)

Ranbaxy was facing many issues such as poor financial position, no major R&D
breakthroughs, increasing price wars and stiff competition in the generics market.
In order to maintain its growth and market position, Ranbaxy needed an influx of
fresh funds and Malvinder Singh was looking for a partner to tide over the
financial and other issues.
21
Daiichi Sankyo, second largest and an innovator company in Japan wanted to
manufacture low cost generics because of Japan government’s new policy of
helping the aging population by low cost generic substitution for branded drugs.
Daiichi lacked the low-cost expertise and looking for a low cost generics
company. They found an opportunity to buy Ranbaxy because of its low cost
production and research facilities to save on costs and drive growth (see Exhibit 4
for comparison). In June 2008, Daiichi Sankyo acquired over 51% stake in
Ranbaxy Laboratories Ltd at Rs. 737 per share. Malvinder Singh sold out his
stake of 34.8% to Daiichi Sankyo. The new entity can create better market
coverage by producing low cost manufacturing. With Ranbaxy’s pool of
scientific, technical and managerial resources and talent the new entity can enter a
new orbit to chart a higher trajectory of sustainable growth in the medium and
long term in the developed and emerging markets. The new entity is a significant
milestone in the Ranbaxy’s mission of becoming a research-based international
pharmaceutical company. As the company moves into a next level of growth it
would benefit the organization, its shareholders and the employees. The proposed
transaction is also in line with Daiichi Sankyo’s goal of becoming an innovator
global company. Thus the creation of new entity would synergize to serve people
globally in terms of low cost drugs. Ranbaxy’s R&D capabilities of low cost
manufacturing and Daiichi Sankyo’s competency of innovation will provide the
new entity with a sustainable, long-term competitive advantage.

4.3 Acquisition by Sun Pharmaceuticals (2014)

Shares of Sun Pharmaceutical Industries and Ranbaxy Laboratories were trading

higher by 3% each on the bourses ahead of record date set for the merger.

Last week, after announcement of closure of merger deal with Ranbaxy, Sun
Pharma said that Ranbaxy will be delisted from the Indian Stock Exchanges.

Today is the last trading day of Ranbaxy Laboratories on the bourses. On

Monday, April 6, 2015, Sun Pharma stock will turn ex-scheme of amalgamation
on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

Sun Pharma has fixed April 07, 2015 as the record date in order to determine the
names of the shareholders of erstwhile Ranbaxy who would be entitled to receive
8 ( eight) equity shares of Re 1 each of the company for every 10 (ten) equity
shares of Rs 5 each of erstwhile Ranbaxy held.

22
At 1107 hours, shares of Sun Pharma were trading 3% higher at Rs 1,052 on the
BSE. The stock hit a high of Rs 1,053 and low of Rs 1,020 so far. Ranbaxy
Laboratories, too, is up nearly 3% at Rs 837, after hitting high of Rs 838 on the
BSE during intra-day trade.

23
 ROADBLOCKS AND FEASIBLE SOLUTIONS

A Crucial Time for Ranbaxy

Ranbaxy Laboratories was established in 1961 and is a member of the Daiichi

Sankyo group (Tokyo, Japan), a leading global pharma innovator. Daiichi Sankyo
is also a majority shareholder of Ranbaxy, with 63.4% outstanding
share. Ranbaxy has ground operations in 43 countries and 21 manufacturing
facilities located in 8 countries, and its impressive portfolio of products is sold in
over 150 countries.

Although the company met its sales targets for the latest financial year, it has been
incurring a net loss and suffering a decline in net worth since 2011, which can be
attributed to a few key circumstances. These include the settlement amount of
US$ 515 million paid to the US Department of Justice (DOJ) in May 2013 after
civil and criminal charges were brought against it for misrepresentation of data
and irregularities found in two of its facilities in India, diminution in the value of
its investments and a loss on foreign currency option derivatives. Thus, the
merger of the company with Sun Pharma comes at a crucial time when Ranbaxy
is struggling to improve its financial position.

Ranbaxy and Sun Pharma: A Mega Indian Merger

The boards of India’s two leading pharmaceutical companies, Sun

Pharmaceuticals and Ranbaxy Laboratories, announced their merger in April
2014. In what is touted to be one of the biggest M&A deals in the Indian market,
estimated at US$4 billion, Sun Pharmaceuticals acquired all outstanding shares of
Ranbaxy in an all-stock transaction. The shareholders of Ranbaxy received 0.8
shares of Sun Pharma for each Ranbaxy share. While at the time of the
announcement the deal was expected to close by December 2014, delays in
regulatory approvals pushed it to one year late.

Both Ranbaxy and Sun Pharma are established names in the pharma industry
worldwide and have operations in a number of countries. They
also complement each other in their areas of expertise and efficiency, both
functionally and geographically. While Sun Pharma is a major global specialty
pharmaceutical company with expertise in complex and niche therapy areas and a
proven record of turning around its acquisitions, Ranbaxy has a strong global
footprint and presence in the generics segment. According to Sun

24
Pharma’s annual report of 2013-14, the pro-forma revenues of the merged entity
are estimated at US$ 4.2 billion for the CY (calendar year) 2013. The transaction
also make Sun Pharma the fifth-largest pharmaceutical company globally in terms
of revenues, with operations in over 55 markets and 40 manufacturing facilities
worldwide.

Regulatory Approvals

 By August 2014, Sun Pharma and Ranbaxy had obtained clearances from
both the stock exchanges in India (NSE and BSE) as well as from anti-
competition authorities in all applicable markets except India and the U.S

 The CCI (Competition Commission of India) approved the acquisition of

Ranbaxy by Sun Pharma on December 5, 2014 on the precondition that
seven brands, constituting less than 1% of total revenues of the combined
entity in India, be divested in order to prevent the merger from negatively
impacting competition in the domestic market.

 On February 2, 2015, both companies announced that the U.S. FTC

(Federal Trade Commission) had granted early termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (HSR Act) on the precondition that Sun Pharma and Ranbaxy divest
Ranbaxy’s interests in generic minocycline tablets and capsules to an
external third party. As per the proposed settlement, Ranbaxy’s generic
minocycline assets will be sold to Torrent Pharmaceuticals, which markets
generic drugs in the U.S.

 As of February 22, 2015, the companies were awaiting approval of the

High Court of Punjab and Haryana, India. Both Sun Pharma and Ranbaxy
will also have to meet the pre-conditions set forth by the CCI and U.S.
FTC for the merger to be closed.

The Bottom Line

In one of the biggest M&A transactions in India and the pharma industry
worldwide, Sun Pharma announced the acquisition of Ranbaxy Laboratories in
April 2014 in an all-stock transaction valued at US$ 4 billion. Ranbaxy
shareholders will receive 0.8 of a share of Sun Pharma for each Ranbaxy share.
Daiichi Sankyo, the largest shareholder of Ranbaxy, will become the second
largest shareholder of the merged entity with a 9% stake and the right to nominate
one board member. The merger will create the world’s fifth largest specialty-
generic pharmaceutical company and the largest player in the Indian pharma
market. The pro-forma revenues of the merged entity for CY 2013 are estimated

25
at US$ 4.2 billion, with 47% contribution coming from the U.S., 22% from India,
and about 31% from the rest of the world and other businesses.

Although Sun Pharma has a robust track record of turning around its acquisitions,
as highlighted by its acquisitions of Taro, DUSA and URL in the last decade, this
one is by far the biggest and hence the most challenging, especially given the
poor financial performance of Ranbaxy in recent years. Nevertheless, the
company is hoping to generate synergy benefits of US$ 250 million by the third
year after the closure of the deal. These benefits will mostly come from increased
revenue, heightened procurement and supply chain efficiencies and other cost
synergies. Most of the regulatory approvals, including those from the stock
exchanges in India, CCI and the U.S. FTC, have been received with certain
preconditions. The deal is estimated to close by early 2015 once it is approved by
two courts in India and meets the preconditions set by the CCI and the U.S. FTC.

Pros

• The deal resulted in making Sun Pharmaceuticals the largest pharmaceutical

company in India and world's fifth-largest generic drug maker entity.

• Ranbaxy was already struggling with many core issues. The proposed synergies
and FTFs (first-to-file) makes the deal lucrative. 

• The shareholders won’t have to face any kind of share dilution by the deal. It
can lead to monetization of FTFs. 

• Sun Pharma can now use the Ranbaxy strength to enhance the business. Due to
the core issues Ranbaxy was unable to focus on it derma products. 

• Sun Pharma now have Ranbaxy's strong controlled substance pipeline. It was a
rewarding opportunity for Sun Pharma and the investors. 

Cons

• The deal has crossed the USD 4 billion mark and it is because Sun Pharma has
to deal with the Ranbaxy’s debt. 

• Sun Pharma has to find out new ways to reduce the high overheads that can
eventually lead to improve profitability in business. 

• Sun Pharma has to check out the FDA issues that are linked with Ranbaxy. 

26
• Sun Pharma has to improvise on the strategies to make profits from the
emerging markets as Ranbaxy is not faring well in most of the emerging markets
including Romania. 

• Presently the deal amount will restrict Sun Pharmaceuticals from investing in
any other major projects and opportunities in the US markets. 

Conclusion

It is one of the best deals in the pharmaceutical industries. It will result in the
largest pharmaceutical company in India. The company can spread its operations
in many other countries. In all small pitfalls are there bit overall the deal looks
impressive.

27
 FUTURE PROJECTIONS

Sun Pharma deal: 'Sunny days ahead for Ranbaxy Laboratories

shareholders'

While the announced merger of Sun Pharmaceuticals Industries and Ranbaxy

Laboratories Ltd in an all-stock $4-billion deal is seen as one that will
complement Sun's product and market portfolios, it also appears to be a good deal
for Ranbaxy shareholders.

Given the stark historical divergence between the financials and the stock price
performance of the two Indian drug makers, the proposed share swap ratio (0.8)
through which five shares of Ranbaxy will transmit into four shares of Sun
Pharma appears to be quite fair.

The Ranbaxy stock has rallied nearly 28% since March 27, 2014, with its relative
value to the Sun stock matching the announced swap ratio. Even if one discounts
the latest price rally, the declared share transaction ratio seems to be a good deal
for Ranbaxy stakeholders given its average relative value to that of Sun stood at
about 0.6 times in the month ended March 27.

Ranbaxy’s financial performance record is inferior to Sun Pharmas. In the last

five fiscals (between FY08 and FY13), the revenue and operating profit of
Ranbaxy have grown at a compounded annual growth rate of 7.5%. Sun Pharma,
on the other hand, has witnessed its top-line and operating income rise 27.5% and
28%, respectively.

Moreover, due to forex liabilities and certain derivative transactions weighing on

its bottom line, Ranbaxy has reported losses in two of its last three fiscals.
Conversely, Sun Pharmas net income has grown at a 15% CAGR between FY08
and FY13. Not surprisingly, Ranbaxy shares have lost 3% of their value over the
period while the Sun Pharma stock has added 39%.

Although historical data justify why Ranbaxy shareholders will be willing to

participate in the merger, Sun's record of successfully turning around stressed
businesses also portrays an improvement in the future profitability of Ranbaxy.

As per Edelweiss Securities, Sun Pharma could harness Ranbaxy's existing

capabilities, geographical presence and product portfolio, resulting in improved
profitability for the latter. Ranbaxys Ebitda margin could touch the earlier
targeted 16-18% on scale up (better RoW, India) and operational efficiencies
post-merger, it said in a flash note.

28
The combined entity, which Sun Pharma anticipates to be cash EPS (earnings per
share) accretive within a year of the closure of the deal, is likely to benefit from
resolution of the ongoing regulatory issues faced by Ranbaxy. All the four US
FDA approved plants of Ranbaxy are currently facing import alerts.

Bank of America Merrill Lynch is of the view that Ranbaxy is at the peak of
regulatory issues, which were responsible for the sub-optimal margins of 8% in
2013.

While it is difficult to ascertain the regulatory timeline, we believe there is

significant scope for operational improvement and hence earnings upside, added
BofAML in a research note. The foreign brokerage upgraded Sun Pharma to buy
after the merger announcement citing significant synergies over the next three to
four years, which may lead to 10-12% incremental EPS from the third year of the
acquisition.

Sun Pharma buyout of Ranbaxy Laboratories will propel the combined entity to
the number 1 spot in India

29
 CONCLUSION OF THE STUDY

Sun Pharmaceuticals Completes Ranbaxy Laboratories

Sun Pharmaceuticals Industries Ltd bought Ranbaxy Laboratories Ltd through an

all-stock merger in which five shares of Ranbaxy fetch four shares of Sun
Pharma. Based on their closing prices, a share of Ranbaxy valued at Rs.460 will
get four-fifths of a Sun Pharma share valued at Rs.458.

It seems a fair exchange ratio but Ranbaxy’s shares have risen sharply since 27
March, 2014. The market appears to not only have got wind of the deal but the
ratio as well, since the share levels match the ratio so well. That is something for
the market regulator to investigate, if the rise in Ranbaxy’s share price was a mere
coincidence or if somebody had insider information on the deal and acted on it. If
we consider the closing prices as on 27 March, 2014. Ranbaxy shareholders
would have got a 29.3% premium, which seems fair.

Who Benefits and How?

Daiichi Sankyo Co. Ltd: Daiichi is the parent company of Ranbaxy since it
bought the Indian drug maker from its earlier promoters. Daiichi faced criticism
after Ranbaxy’s plants came under the US Food and Drug Administration’s
(FDA’s) scanner shortly after the acquisition. Even after so many years,
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, though one can expect it to sell that stake
eventually. On a conference call, however, Sun Pharma’s management indicated
they plan to work together with Daiichi to grow the business.

Ranbaxy: Along with the acquisition news, Ranbaxy announced that it received a
subpoena dated 13 March 2014 asking for information about its Toansa facility
that received an import alert from the US FDA.

30
 PROFESSIONAL OUTCOME
The Outcome and Resulting Synergies

The annual report of Sun Pharma for FY 2013-14 highlights the following points
of significance to note about this merger, and the opportunities that are to result
from it:

 The new entity will be the world’s fifth largest specialty-generic pharma

company with sales of US$ 4.2 billion on a pro-forma basis for CY 2013.
The entity will have a presence in 55 countries and be supported by 40
manufacturing facilities worldwide, with a highly complementary
portfolio of products for both acute and chronic treatments.

 In the U.S., the merged entity will be No.1 in the generic dermatology
market and No. 3 in the branded dermatology market. It will also become
the largest Indian pharma company operating in the U.S.

 The pro-forma U.S. revenues of the merged entity for CY 2013 are
estimated at US$ 2.2 billion and the entity will have a strong potential in
developing complex products through a broad portfolio of 184 ANDAs
(Abbreviated New Drug Application) awaiting US FDA approval,
including many High-value FTF (First to File) opportunities.

 The merger will make Sun Pharma the largest pharma company in India
with pro-forma revenues of US$ 1.1 billion for CY 2013 and over
9% market share. The acquisition will also enable Sun Pharma to enhance
its edge in acute care, hospitals and OTC businesses with 31 brands
among India’s top 300 brands and a better distribution network.

 The merger will also improve Sun Pharma’s global footprint in emerging
pharma markets like Russia, Romania, Brazil, Malaysia and South Africa,
offering opportunities for cross-selling and better brand-building. The
merged entity will have combined pro-forma revenues of US$ 0.9 billion
for CY 2013 in emerging pharma markets.

 Pro-forma EBITDA of the merged entity for CY 2013 is estimated at US$

1.2 billion.

 Synergy benefits of US$ 250 million are expected to be realized by the

third year following the closure of the deal, driven by a combination of
revenue, procurement and supply chain efficiencies and other cost
synergies.

31
 Post-deal closure, Daiichi Sankyo (the majority shareholder of Ranbaxy)
will become the second largest shareholder of Sun Pharma with a 9%
stake.

 Daiichi Sankyo has also agreed to indemnify the merged entity for costs

and expenses incurred in Ranbaxy’s recent settlement with the US
Department of Justice in regards to its Toansa facility in India.

32