Ranbaxy Daiichi Sankyo Merger

Presented by: Pramod

Sandeep

Tushar

Pawan

Hemant

Arun

Aditi

IntroductionIntroduction• India’s largest pharmaceutical company.•Incorporated in 1961•Atul Sobti is currently Ranbaxy CEO and Managing Director•Present Chairman- Dr. Tsutomu Une•Exports its products to 125 countries •Ground operations in 46 countries •Manufacturing facilities in 7 countries. •HQ: Gurgaon, Haryana.

History History Started by Ranbir Singh and

Gurbax Singh in 1937.In 1998, Ranbaxy entered the

United States marketJapanese company Daiichi

Sankyo gained majority control in 2008.

FinancialsFinancials2008- Global Sales of US $ 1,682

MillionGrowth of 4%.North America, the Company's

largest market contributed sales of US $ 449 Million

India clocking sales of around US $ 300 Million

Market share in India is 5%

Major SetbackMajor Setback December 2005, Ranbaxy's

shares hit hard by a patent ruling disallowing production of its own version of Pfizer’s drug Lipitor.

September 2008, the FDA issued two Warning Letters to Ranbaxy and an Import Alert for generic drugs produced by two manufacturing plants in India.

Major Alliances / Major Alliances / CollaborationsCollaborationsDrug Discovery & Clinical

Development – GlaxoSmithKline(Anti-infective and Respiratory

Segments) Drug Discovery Clinical

Development – Merck Statin molecule out licensed to

PPD, USA

IntroductionIntroduction Japan based pharmaceutical company.

Established in 2005 - merger of Sankyo Co., Ltd. and Daiichi Pharmaceutical Co., Ltd.

Head Office – Tokyo

Leading company in the field of cardiovascular drugs.

Workforce - 29,272 people (as of September 30,2009) Capital - 50 billion yen

U.S. subsidiary, Daiichi Sankyo, Inc. (DSI)

European subsidiary, Daiichi Sankyo Europe GmbH (DSE)

HistoryHistorySankyo – Established in 1913

Daiichi Pharmaceutical – Established in 1918

September 28, 2005 - DAIICHI SANKYO COMPANY, LIMITED

2006 – Started operation of DAIICHI SANKYO HEALTHCARE CO.,

LTD. Started operations of DAIICHI SANKYO Inc. Started operations of Daiichi Sankyo Europe GmbH

April 1, 2007- started operations as the newly formed DAIICHI SANKYO Group

Research and Development Research and Development

GEMRAD (Global Executive Meeting of Research And Development) - top research and development decision-making body.

Research focusing on the six areas of cardiovascular diseases, glucose metabolic disorders, infectious diseases, cancer, immunity and allergies, and bones/joint diseases.

Core Development Areas: Thrombosis, Diabetes, Malignant Neoplasm, and Autoimmune Diseases

Franchise areas: Hypertension, Bacterial Infections, and Hyperlipidemia / Atherosclerosis

ProductsSankyo -Benicar (olmesartan medoxomil) Mevalotin (pravastatin) Loxonin (loxoprofen) Olmetec (olmesartan) Captopril Zantac (ranitidine) WelChol (colesevelam HCl) Effient (Prasugrel)

Daiichi Pharmaceutical –Cravit (levofloxacin) Evoxac (cevimeline) FloxinOtic (ofloxacin) Gracevit® (sitafloxacin, only sold in

Japan)

WHAT IS MERGERWHAT IS MERGER

Merger is defined as fusion of two or more existing companies.

One survives and the others lose their corporate existence.

The survivor acquires all the assets as well as liabilities of the merged company or companies.

WHAT IS WHAT IS ACQUISITION/TAKEOVERACQUISITION/TAKEOVER

An acquisition is the purchase of a company by another one by controlling its share capital.

A ‘takeover’ is acquisition and both the terms are used interchangeably.

a)Purchase of shares in open market.b)Takeover offer to the general body of shareholders.c)Acquisition of share capital through cash, issuance of loan capital, or insurance of share capital.d)Major shareholders commanding majority of voting power

An acquisition may be friendly or hostile

Time taken in completion of transaction is less in takeover than in mergers.

Offeror company decides about the maximum price.

Acquisition usually refers to a purchase of a smaller firm by a larger one.

RANBAXY-DAIICHI SANKYO

THE DEAL

THE DEALProvide Stronger Platform for

Drug Development, Manufacturing & Global Reach

Aim to be Research based International Pharmaceutical Company.

THE DEAL34.8% stake worth 10,000

crores($2.4 billion)At Rs 737 per shareDaiichi will pick up another 9.4%

through Preferential AllotmentOpen offer of 20% to

Shareholders of Ranbaxy

THE DEALOn June 11 2008, Daiichi Sankyo

acquired a 34.8% stake in Ranbaxy

valued at $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.

THE DEALMr. Singh plans to Invest his

$2.4 billion in:Financial Services & HospitalsReligareFortis

WHY RANBAXY DID IT ?WHY RANBAXY DID IT ? A very “ intelligent” deal

Had held share for 50 years

But the Ranbaxy growth curve had peaked2006 – 16% growth2007 – 7% growth2009- 9% growth forecast

Business model was struggling with high litigation costs and devaluation of the rupee against the USD

US strategy was looking in the face of more expensive litigation

Selling of entire stake at 30% premium

WHY DAICHI DID IT ?WHY DAICHI DID IT ? Japan has an ageing population and they needed new market

There is growing recognition in Japan of the importance of generic drugs

Japanese health Ministry is encouraging doctors to use generic drugs to reduce the health budget

Acquisition of Ranbaxy gives Daiichi a low cost manufacturing base in India

Daiichi will have a strong generics operations in India and operations in 60 different countries

Daiichi moves from 22nd rank to 15th among world largest pharmaceutical companies

EFFECTS ON PHARMA EFFECTS ON PHARMA INDUSTRYINDUSTRY

THE EFFECTS ON RANKINGSTHE EFFECTS ON RANKINGS

Before MergerBefore Merger Ranbaxy 8Ranbaxy 8thth largest Generic Drug largest Generic Drug

Maker in the WorldMaker in the World Daiichi Sankyo 25Daiichi Sankyo 25thth Largest Largest

Pharmaceuticle Company in the WorldPharmaceuticle Company in the WorldAfter MergerAfter Merger Ranbaxy Daiichi 15Ranbaxy Daiichi 15thth Largest Largest

Pharmaceutical CompanyPharmaceutical Company Ranbaxy to be among the top five Ranbaxy to be among the top five

Generic Drug makers in the worldGeneric Drug makers in the world

The New TrendThe New TrendRANBAXY a Generics MakerRANBAXY a Generics Maker

Daiichi: an Innovator Daiichi: an Innovator

A Merger termed as the A Merger termed as the “Ardhnarishwar” Model“Ardhnarishwar” Model

MARKET PENETRATIONMARKET PENETRATIONRanbaxy gets a support in the Ranbaxy gets a support in the

R&D Sector where it lags R&D Sector where it lags Daiichi forays in the Generics Daiichi forays in the Generics

sector with India’s largest sector with India’s largest Generics ManufacturerGenerics Manufacturer

Penetration of Ranbaxy in Penetration of Ranbaxy in Japanese market made easy and Japanese market made easy and same for Daiichi in Indiasame for Daiichi in India

For RanbaxySignificant milestone in becoming

a research-based international pharmaceutical company.

Ranbaxy will gain easier access to the much-coveted Japanese market by operating from within the Daiichi Sankyo

The immediate benefit for Ranbaxy is that the deal frees up its debt and imparts more flexibility into its growth plans.

For DaiichiEasier to enter the Indian market.Bigger goal - in securing a strong

presence in the global market for generics.

The acquisition will help Daiichi Sankyo to jump from number 22 in the global pharmaceutical sector to number 15.

The main benefit is Ranbaxy’s low-cost manufacturing infrastructure and supply chain strengths.

Will be able to reduce its reliance on only branded drugs and margin risks in mature markets.

Benefit from Ranbaxy’s strengths in generics to introduce generic versions of patent expired drugs, particularly in the Japanese market.

Additional NDAs from the US FDA on anti-histaminics and anti-diabetics is an added advantage.

For the Joint VentureA complementary business combination that

provides sustainable growth by diversification that spans the full spectrum of the pharmaceutical business.

An expanded global reach that enables leading market positions in both mature and emerging markets with proprietary and non-proprietary products.

Strong growth potential by effectively managing opportunities across the full pharmaceutical life-cycle.

Cost competitiveness by optimizing usage of R&D and manufacturing facilities of both companies, especially in India.

Both companies acquire a broader product base, therapeutic focus areas and well distributed risks.

Effect of deal on India as Effect of deal on India as whole whole 1) Loss of good influencing people

from pharma sector 2)Maximum use of available natural

resources and not rational use.3) Use the Indian talent in good manner at cheap rate.4)Capture of rich Indian generic store.

Common influences of merger on both Daichii and Ranbaxy

Reduced competition & choice for consumer in oligopoly market

Likelihood of job cuts

Conflict with new management

Difficulty in cultural integration

Monetory cost to the company

Happenings with Ranbaxy after mergerUS regulator plan to stop reviewing any drug

made at Paonta Shahib (one of the Ranbaxy Indian plant)

Ranbaxy failed to secure the American drug regulator’s permission to market generic drug in US.(Astellas ,Flomax)

Ban on import of around 30 generic drug by FDA US

Financial loss

Impact of it on DaiichiDaichii have to face competitor of

RanbaxyRanbaxy acquisition puts Daiichi Sankyo

in redPrice Daiichi paid for acquisition was

quite high compared to the present pricing of other Indian generic drug making companies.

Lots of government restrictions on Ranbaxy drug Daiichi has toappoint industry experts to resolve issues

related to the USFDA

Impact of it on DaiichiDaiichi Sankyo's Loss Forecast The FDA's latest findings come less than

a month after Daiichi Sankyo reported a $3.7 billion loss in the October-December quarter and warned that annual earnings would swing to a loss. The Tokyo-based company now expects a net loss of $3.2 billion this fiscal year through March, instead of the previously predicted $663 million gain, largely because of the yen's recent strength and the Ranbaxy deal

The currency hedges by Ranbaxy would cost the Japanese drugmaker around $122 million this financial year

Impact of it on Daiichi Japan accounts for 68 per cent of Daiichi

Sankyo’s sales, with North America being the second largest market contributing 20 per cent, followed by Europe with 9 per cent and other markets 3 per cent. SoThe fourth-quarter net loss of the Japanese pharma giant amounts to $390.1 million, which has been attributed to the acquisition of Ranbaxy.

“Daiichi Sankyo might have been deceived

by Ranbaxy” by analyst Fumiyoshi Sakai. Expiring of Ranbxy patent cutting down the

royalty payment

Effect on Indian Effect on Indian Pharmaceutical IndustryPharmaceutical Industry

Ranbaxy fell 3% on stock market Ranbaxy fell 3% on stock market because of low acceptance and because of low acceptance and capital gainscapital gains

Hence, proving the deal to be Hence, proving the deal to be disadvantage to the industrydisadvantage to the industry

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