Re: Repercussions of pharmaceutical company take over in developing economies

[Guest guest]

Dear Dr. Manoj:

There is absolutely no need to apologize for that because our NetRUMians are all learned and enlightened enough to know the difference between these terminologies. I reproduced them just for the sake of my interest and the interest of some student members of our group. Probably you want this discussion to revolve round the Daiichi Sankyo take over of Ranbaxy and its impact on our pharmaceutical sector. Here is an article related to that. (Ref: www.indiamarks.com)

The Acquisition effects on Ranbaxy

There has been speculations that after the acquisition of Ranbaxy, many other companies may follow suit. This deal makes Japanese firm Daiichi the 15th biggest drugmaker in the world. Malvinder Singh will continue as CEO and MD and the company will retain its name. The Singh family would net in about Rs 10,000 crore by selling their stake. Malvinder Singh would also assume the position of chairman of the board upon the deal's closure that is expected by March 2009. The Japanese firm would acquire the entire 34.82 per cent stake from its current promoters Malvinder Singh and family. Also Daiichi would make an open offer for an additional 20 per cent stake in Ranbaxy at a price of Rs 737 per share which represents a premium of over 50 per cent on the average price

over the last three months.Besides the promoters' 34.8 per cent stake, Daiichi would also get about 9 per cent through issue of preferential allotment of shares and some warrants, which could be later converted into another 4.5 per cent holding. These, along with a minimum 8 per cent that the new promoters wish to acquire through the open offer, would take Daiichi's holding to above 50 per cent. Post acquisition, Ranbaxy would become a debt-free firm with a cash surplus of around Rs 2,800 crore (Rs 28 billion). The two firms said they plan to keep Ranbaxy a listed entity in India.Impact of Ranbaxy on Indian Pharmaceutical sector To some industry observers, promoters of other Indian pharma companies should take a cue from Ranbaxy’s move. Ranjit Kapadia, Head of Research (Pharma), Prabhudas Liladhar said: “The valuation is about 20 times of Ranbaxy’s EBIDTA and about 4 times its total sales. Its a great deal. Other Indian

promoters should realise that at the right place and at the right time, they should divest their stake instead of clinging on for emotional attachment.â€Even as Indian companies have been on a active acquisition mode globally, there has been also been off and on rumours of global companies planning to acquire Indian majors, such as Cipla, Aurobindo and Shasun Chemicals. Recently, the Burman family exited the pharma business by selling its entire 65% stake to German company Fesenius Kabi.

The Early Days of Ranbaxy

The company Ranbaxy first came to become headlines when it launched the product 'Calmpose' in 1969 which was India's answer to Roche's 'Valium'. Thus started the journey of an Indian pharmaceutical Company into generic drugs. When the international market was headed by biggies like Pfizer, Novartis and GlaxoKline, Ranbaxy's entry in that arena led to many buyers turning to less expensive production houses in India. The name 'Ranbaxy'Initially, Mr Ranjit Singh and Dr Gurbux Singh, who were distributors for A. Shionogi, a Japanese pharmaceutical company manufacturing vitamins and anti-TB drugs, started this Company in the early sixties. The name Ranbaxy is a fusion of these original promoters. Then Bhai Mohan Singh

took over Ranbaxy. Bhai Mohan Singh was the recipient of the Padma Vibhusan award in 2005. He passed away on March 28, 2006. Bhai Mohan Singh later collaborated with Italian pharma company Lapetit Spa (Milan), and subsequently bought out its business. Ranbaxy Laboratories Ltd went public in 1973 and the sleeping pill Calmpose catapulted the company to the big league.Later, Dr. Parvinder Singh, elder son of Bhai Mohan Singh, became the Managing Director in 1982. His brothers Mr Manjit Singh and Mr Analjit Singh also joined in but later on moved out to other businesses. In 1989, Bhai Mohan Singh decided a three-way split of his assets. Dr. Parvinder Singh was given control of Ranbaxy, Mr Manjit Singh was made in charge of Montari Industries

and Mr Anajit Singh was handed over Max India. However some differences arose between Bhai Mohan Singh and Dr, Parvinder over expansion and strategy planning for Ranbaxy. This led to an ousting of Bhai Mohan Singh from the Company in 1999, thus souring relationship between father and son. Dr. Parvinder Singh died of cancer on July 3, 1999. He was the recipient of the 'Businessman of the year' in 1998. Bhai Mohan Singh speaks of Dr. Parvinder SinghBoth father and son had a sharp sense for sniffing out a business that had the potential to give their company another thrust and they took full advantage of the opportunities presented. Neither spared any efforts to get the Company where they wanted it, and used well their political connections, whenever the need arose.In the begining of the year 2006, Mr Malvinder Mohan Singh, son on Dr.Parviner Singh, took control of the company by becoming Managing Director and CEO, younger brother Mr. Shivinder Mohan Singh, was inducted to the company's board.

With Regards:

Dr. Geer M. Ishaq

Story So Far....

Hi NetRUMians,

In the last few years, the Indian Pharma companies have been a part of numerous "Mergers and Acquisitions"Here is a gist of some of them :

Story so far...In India:

Year 2006: In the year 2006, the Indian pharmaceutical companies had executed more than 40 deals with 32 cross-border transactions worth about $2,000 million which included deals like Dr Reddy's acquisition of Betapharm of Germany for Euro 480 million (Rs 2,550 crore) and Milpharm of the UK and Ranbaxy's Terapia buy in Romania for $324 million (over Rs 1,250 crore), Ethimed of Belgium, GSK's facilities in Spain and Italy, Terapia and Be-Tabs of South Africa.

Year 2007: In the year 2007, the Indian Pharma industry witnessed about 25 mergers and acquisitions (M & A), with 15 cross border transactions with an estimated value of about $600-700 million. Had the Taro Pharma (Israel) acquisition by Sun Pharma been successful ($400 million+ deal), it would have been a whopping $1 billion worth transactions in 2007.

The major pharmaceutical M & A deals in 2007 were Wockhardt's acquisition of the French company Negma Laboratories for $265 million (Rs 1,045 crore) and the US-based Morton Grove Pharmaceuticals for $38 million (Rs 150 crore), Jubilant Organosys' acquisition of Hollister-Stier Laboratories of the US for $122.5 million (about Rs 500 crore) and Alembic's buyout of the entire domestic non-oncology formulation business of Dabur Pharma for Rs 159 crore.

(Source: http://www.rediff. com/money/ 2007/dec/ 31pharma. htm )Sincerely,-- Dr.Manoj Swaminathan MBBS, MPHPharmacovigilance PhysicianSciformix Technologies (P) LtdMLD Complex, MIDC, Andheri (E)Mumbai 400093India.Tel: +91-22-67304339

Not happy with your email address? Get the one you really want - millions of new email addresses available now at -- Dr.Manoj Swaminathan MBBS, MPHPharmacovigilance PhysicianSciformix Technologies (P) LtdMLD Complex, MIDC, Andheri (E)Mumbai 400093India.Tel: +91-22-67304339

Download prohibited? No problem. CHAT from any browser, without download.

-- Dr.Manoj Swaminathan MBBS, MPHPharmacovigilance PhysicianSciformix Technologies (P) LtdMLD Complex, MIDC, Andheri (E)Mumbai 400093India.Tel: +91-22-67304339

Unlimited freedom, unlimited storage. Get it now -- Dr.Manoj Swaminathan MBBS, MPHPharmacovigilance PhysicianSciformix Technologies (P) LtdMLD Complex, MIDC, Andheri (E)Mumbai 400093India.Tel: +91-22-67304339

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[Guest guest]

Dear Dr. Manoj:

I am sorry for the overlapping of text and images in my previous post. To compensate for the same, I am submitting yet another article on Ranbaxy-Daiichi Acquisition Deal, copied from Biospecturm Asia Edition for fair use.

A win win deal

Nandita Singh & Ramchandra Naik

July 1, 2008: Daiichi Sankyo is now Asia’s top generics powerhouse. Earlier, in June, when Japan’s No 3 pharma company Daiichi Sankyo acquired India’s top generics company Ranbaxy laboratories, just about everybody was taken by surprise. No one could have imagined that this is how the pharma segment consolidation story will play out. Not even Ranbaxy CEO, Mr Malvinder Mohan Singh, who himself was pursuing a very aggressive acquisition strategy since early 2006. Under Mr Singh’s leadership Ranbaxy clocked about eight highly valued acquisitions apart from spending dollars on acquiring brands and defining the company’s drug discovery focus. Mr Singh had set his sights on generating $5 billion revenues by 2012 but had missed reaching the $2 billion landmark in 2007 and was looking for ways to boost growth. In fact, according to BioSpectrum’s first pan Asia survey of life science companies, Ranbaxy, in 2007,

in India slipped to No 2 position, growing only by 19 percent. Whereas its closest competitor in the country Dr Reddy’s Laboratories grew by 58 percent over its 2006 revenues to overtake Ranbaxy for No 1 position by the margin of just about $150 million.

For Ranbaxy, the timing of this deal couldn’t have been better. According to Mr Singh, Daiichi Sankyo is strong on the innovator side of the business and Ranbaxy has strengths in the generics space and the coming together of both Ranbaxy and Daiichi Sankyo, enhances the scope and scale of business in marketing, manufacturing and research areas and will result in creating a powerful pan-global presence. Looking at the core strengths of both the companies Ranbaxy-Daiichi Sankyo combined will be in a far stronger position to create a wider value chain and basket of branded, innovative, generics and OTC products in India and other markets across the world. The deal catapulted Daiichi-Sankyo to No 15, globally, from its pre-acquistion rank of No 22. Also, this at once gives Daiichi a ground presence in 60 countries and generics capabilities that the company lacked. India pharmaceutical market had been on Daiichi’s radar for some years now,

admits Mr Takashi Shoda, President & CEO of Daiichi Sankyo Company. Earlier in 2008, the company had set up its subsidiary Daiichi Sankyo India in the country with a view to capitalize on India market potential. The India subsidiary, focused on cardiology and diabetology, even signed a marketing alliance with GSK India to launch its hypertension drug in India.

Ranbaxy’s cool calculation Only a young CEO with a lifetime of business ahead of him could have made this move. Ranbaxy’s Mr Singh took the challenge of growth head on and in the process showcased what globalization can mean for the industry. According to industry analysts, this deal will trigger greater interest in India market and is likely to spur more such deals with the highest impact being felt by mid-size companies. “This is a path breaking deal and will be a trendsetter in many ways,†states Mr Singh. He elaborates that Ranbaxy will operate as an independent and autonomous company and will closely cooperate with Daiichi Sankyo to explore opportunities and drive growth across the entire pharmaceutical value chain in India and globally. Under the deal, there will be a cash infusion of about $1 billion, which will be utilized to retire debt and to aggressively explore options for organic and inorganic

growth. Essentially, not much will change at Ranbaxy except that bottlenecks to growth have been effectively addressed with the ownership being rearranged.

What’s in it for Daiichi Sankyo?Daiichi Sankyo’s acquisition of the majority stake in India’s largest drug maker Ranbaxy Laboratories is a continuation of the ongoing merger and acquisition process in the global generics market. The global market for generics is expected to be $100 billion by December 2010. With combined revenues of over $9 billion, Daiichi-Ranbaxy combine will be one of the Top 15 companies in the global generics market. Daiichi Sankyo Company acquisition will help Ranbaxy expand its presence in the Japanese pharmaceutical market. Japan is the world’s second largest pharmaceutical market. However, it continues to have a predominantly low generics penetration. The ageing Japanese population and increasing healthcare expenditure has prompted the Japanese government to take remedial steps in promoting the use of generic drugs. This augurs well for generic manufacturers and will support Ranbaxy’s

business expansion plans in Japan. The deal will also benefit Daiichi Sankyo as they will get access to over 49 markets around the world and 11 manufacturing plants. Addition of Ranbaxy will help Daiichi make its presence in the lucrative US generic market, since Ranbaxy is one of the leading players in the market. Local rivals Takeda Pharmaceutical, Astellas Pharma, and Eisai, have spent more than $14 billion on acquiring US-based pharmaceutical companies since November 2007 to buffer sales declines as their best-selling drugs lose patent protection.

Creating value In April 2008, Ranbaxy received authorization from Ministry of Health and Labour Welfare (MHLW-Japan) for marketing the generic version of Amlodipine tablets 2.5mg & 5mg. Amlodipine tablets has a market size of around $2 billion (Jan-Dec 2007—IMS Japan). The product is currently the largest molecule that has gone off patent in Japan and represents the biggest generic opportunity so far in the Japanese generic market.

The favorable trends towards generic products in the Japanese market give enough reason for Daiichi to acquire leading generic companies like Ranbaxy. The Japanese Government initiatives are now being formulated to encourage generic prescribing as a cost containment measure. Under the new program, generic companies are being incentivized such that the first generic to market is rewarded at a price equivalent to 70 percent of the original branded price; subsequent generics are priced at a level analogous to the cheapest generic price.

Daiichi Sankyo holds the marketing rights to Mevalotin (Pravastatin), a genericized statin, for Japan, South Korea, Taiwan and Thailand, with Bristol-Myers Squibb holding exclusive rights for all other markets. The Japanese Dyslipidemia market has witnessed tough competition in recent years, with Daiichi Sankyo going head-to-head with Astellas, the marketers of Lipitor (Atorvastatin) in Japan, and also with generic versions of Simvastatin. Since the expiry of Pravastatin patent in 2002, competition from other direct generic competition has significantly eroded Daiichi Sankyo’s share of the lucrative high cholesterol market. Sales of its generic drug Mevalotin declined from a peak of $1,852 million in 2003 to just $804 million in 2006. Datamonitor forecasts that Mevalotin will continue losing sales momentum at a CAGR of -8.3 percent during the period 2006–12. This acquisition of Ranbaxy will help Daiichi gain considerable market share in

the lucrative generic cholesterol lowering drug market, as the Indian company holds the 180-day market exclusivity for the generic version of Lipitor, a rival of Mevalotin recording sales of just under $13 billion in 2007. In addition, Ranbaxy, as a subsidiary, will help it gain strong foothold in the most lucrative US market as well. Daiichi derives less than a quarter of its total sales from the US markets. At present, the company drives US sales through either direct promotion by its US subsidiaries or collaborative partnerships with US-based pharmaceutical players. One such collaboration is with Forest Laboratories for the commercialization of its complete olmesartan franchise, comprising Benicar, Benicar HCT and the recent addition, Azor. Ranbaxy’s low cost talent pool, workforce and manufacturing units and its presence in 49 countries are certainly a bonus to the Japanese parent, as the combined entity’s sales will be more than $9

billion.

Complementary therapy areas for Daiichi & Ranbaxy

Therapy Area

Daiichi Sankyo

Ranbaxy

Autoimmune & Inflammation

6 marketed products, one in phase III, and four candidates in phase II—major products are Alesion, Hirudoid, Loxonin, LX-A, Mobilat and Zyrtec

15 marketed products and 1 pending approval--major products are Alerid, Altiva, Diprovate, Dolamide and

Blood & Lymphatic System

2 marketed products and 1 pending approval--major products: Bosmin and Venofer

8 marketed products-- major products: Conviron-TR, Pravator and Ultiron TR

Cardiovascular & Circulatory System

20 marketed products, 1 pending approval, two candidates in phase III, two in phase II and one in phase I—major products are: Benicar, Bepricor, Lopresor and Mevalotin

46 marketed products and 1 pending approval—major products are: Amlodipine, Aspenter, Caritec, Nifedipine and Veratide

Central Nervous System

3 marketed products, two candidates in phase III, one each in phase I & II—major products: CS1401E, DL404 and Falzy

44 marketed products and 6 pending approvals-- major products are: Doxepin, Fortwin, Lexotanil, Pentazocine, Naloxone and Spectra

Infections

11 marketed products and 1 approved—major products are: Banan, Feron, Tarivid and Cravit

More than 60 marketed products, 1 approved and 3 pending approvals—major products are Acyclovir, Azostat, Cifran, Gramoneg, Nizoral, Raniclor, Suprimox, Statum and Virol

Will Pfizer make a hostile bid on Ranbaxy?In late 1999, Pfizer successfully launched an aggressive bid to acquire Warner-Lambert and prevented it from being bought by American Home Products. Pfizer made an $82 billion hostile bid for Warner-Lambert and ended up paying around $20 billion more than what American Home Products offered. The primary reason for this bid was Lipitor—the jewel in Warner Lambert’s crown.

Lipitor, the best selling cholesterol lowering drug in the world, contributed approximately $13 billion to the company’s top-line growth in 2007. However, the product sales declined by more that $200 million compared to its sales in 2006 due to generic competition. Especially in the US, Lipitor sales recorded a decline of eight percent in 2007.

US Basic Product Patent

Drug

Expiration Year

Aricept

2010

Lipitor

2010

Xalatan

2011

Viagra

2012

Detrol

2012

Celebrex

2014

Zyvox

2015

Chantix

2018

Lyrica

2018

Sutent

2021

Since 2003 Ranbaxy aggressively challenged the patent protection on Lipitor and won favorable judgments in many countries including the US, and currently owns the 180-day generic version exclusivity for Lipitor in the US. The company was likely to launch the generic version before 2010. This would have impacted Pfizer significantly in terms of sales as Lipitor currently contributes over $13 billion to its annual sales. By taking over Ranbaxy, Pfizer will control the marketing and launch of the generic version of Lipitor after 2010.

However, just when this magazine was going to print Ranbaxy Laboratories and Pfizer Inc. entered into an agreement to settle most of the patent litigation worldwide involving Lipitor (Atorvastatin). This decision will allow for an earlier introduction of a generic formulation that will benefit patients and many healthcare systems throughout the world.

Under the terms of the agreement, Ranbaxy will have a license to sell generic versions of Atorvastatin and the fixed-dose combination of Atorvastatin-Amlodipine besylate in the US effective November 30, 2011.

According to Ranbaxy CEO, Mr Singh, “The agreement comprehensively settles outstanding issues between Ranbaxy and Pfizer bringing to closure a number of ongoing patent disputes. It also provides certainty and visibility to the launch of Ranbaxy’s Generic Atorvastatin, with180 day market exclusivity in the US and an early entry in other markets. This will make the worlds largest selling drug more accessible to patients who will gain from the timely availability of an affordable quality option.â€

Ranbaxy will also have a license to sell Atorvastatin on varying dates in an additional seven countries, including: Canada, Belgium, Netherlands, Germany, Sweden, Italy and Australia. Ranbaxy and Pfizer have also resolved their disputes regarding Atorvastatin in Malaysia, Brunei, Peru and Vietnam.

In addition, the lawsuits between Pfizer and Ranbaxy regarding Atorvastatin will be dismissed in select countries and the lawsuits between Pfizer and Ranbaxy regarding the fixed dose combination product containing Atorvastatin and amlodipine will be dismissed in the US and Ranbaxy will no longer contest the validity of Pfizer’s patents in such countries.

Litigation between Ranbaxy and Pfizer relating to Lipitor will continue in five other European countries—Finland, Spain, Portugal, Denmark and Romania.

Despite stellar performance over 2001–07, Pfizer will face significant commercial challenges over the period 2007–12 that will threaten its status as the world’s largest pharmaceutical company. In particular, the high value end of Pfizer’s product portfolio faces considerable exposure to patent expiry and subsequent generic erosion, with Lipitor expected to be the highest profile casualty (See Table). Ethical pharmaceutical sales are forecast to decline at a negative CAGR of -4.2 percent over the period 2006–12, compared to an average sales CAGR of 4.4 percent forecast across the other players within the Big Pharma peer set. Anticipated loss of US patent exclusivity for Lipitor (in 2010) is forecast to act as the overriding driver on Pfizer’s commercial performance over the period 2006–12. These are reasons good enough for Pfizer to make a hostile bid.

With regards

Dr. Geer M. Ishaq http://ishaqgeer.googlepages.com

Story So Far....

Hi NetRUMians,

In the last few years, the Indian Pharma companies have been a part of numerous "Mergers and Acquisitions"Here is a gist of some of them :

Story so far...In India:

Year 2006: In the year 2006, the Indian pharmaceutical companies had executed more than 40 deals with 32 cross-border transactions worth about $2,000 million which included deals like Dr Reddy's acquisition of Betapharm of Germany for Euro 480 million (Rs 2,550 crore) and Milpharm of the UK and Ranbaxy's Terapia buy in Romania for $324 million (over Rs 1,250 crore), Ethimed of Belgium, GSK's facilities in Spain and Italy, Terapia and Be-Tabs of South Africa.

Year 2007: In the year 2007, the Indian Pharma industry witnessed about 25 mergers and acquisitions (M & A), with 15 cross border transactions with an estimated value of about $600-700 million. Had the Taro Pharma (Israel) acquisition by Sun Pharma been successful ($400 million+ deal), it would have been a whopping $1 billion worth transactions in 2007.

The major pharmaceutical M & A deals in 2007 were Wockhardt's acquisition of the French company Negma Laboratories for $265 million (Rs 1,045 crore) and the US-based Morton Grove Pharmaceuticals for $38 million (Rs 150 crore), Jubilant Organosys' acquisition of Hollister-Stier Laboratories of the US for $122.5 million (about Rs 500 crore) and Alembic's buyout of the entire domestic non-oncology formulation business of Dabur Pharma for Rs 159 crore.

(Source: http://www.rediff. com/money/ 2007/dec/ 31pharma. htm )Sincerely,-- Dr.Manoj Swaminathan MBBS, MPHPharmacovigilance PhysicianSciformix Technologies (P) LtdMLD Complex, MIDC, Andheri (E)Mumbai 400093India.Tel: +91-22-67304339

Not happy with your email address? Get the one you really want - millions of new email addresses available now at -- Dr.Manoj Swaminathan MBBS, MPHPharmacovigilance PhysicianSciformix Technologies (P) LtdMLD Complex, MIDC, Andheri (E)Mumbai 400093India.Tel: +91-22-67304339

Download prohibited? No problem. CHAT from any browser, without download.

-- Dr.Manoj Swaminathan MBBS, MPHPharmacovigilance PhysicianSciformix Technologies (P) LtdMLD Complex, MIDC, Andheri (E)Mumbai 400093India.Tel: +91-22-67304339

Unlimited freedom, unlimited storage. Get it now -- Dr.Manoj Swaminathan MBBS, MPHPharmacovigilance PhysicianSciformix Technologies (P) LtdMLD Complex, MIDC, Andheri (E)Mumbai 400093India.Tel: +91-22-67304339

Bring your gang together. Do your thing. Find your favourite Group.

From Chandigarh to Chennai - find friends all over India. Click here.

Unlimited freedom, unlimited storage. Get it now