Ranbaxy Acquisition

7/31/2019 Ranbaxy Acquisition

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Ranbaxy Acquisition By

Daiichi - Sankyo



Contents

1.Introduction 1.About the Companies 1.Acquisition 1.Reasons behind Acquisition 1.Advantages and Outcome 1.Effect on Stock Market 2.Conclusion



Ranbaxy Daiichi - Sankyo Deal

• Daiichi - Sankyo, the Japanese pharmaceuticals company,has acquired 52.5-per cent stake in Ranbaxy • Under the terms of the deal, Ranbaxy will become a

subsidiary of the Japanese company • Ranbaxy - access to Daiichi’s expertise in research • Daiichi - benefit from low-cost production



Acquisition

• Is the buying of one company (the ‘target’) by another

• May be friendly or hostile • Usually refers to a purchase of a smaller firm by a larger

oneTypesa) Buyer buys the shares b) Buyer buys the assets of the target company



Advantages of Acquisition

• Increase in sales/revenues

• Profitability of target company• Increase market share• Reduction of overcapacity in the industry• Enlarge brand portfolio (e.g. L'Oréal's takeover of

Bodyshop)



Disadvantages of Acquisition

• Reduced competition and choice for consumers in

oligopoly markets (Bad for consumers, although this isgood for the companies involved in the takeover)• Likelihood of job cuts • Cultural integration/conflict with new management• Hidden liabilities of target entity • The monetary cost to the company



About Ranbaxy



About Ranbaxy

• Integrated, research based, internationalpharmaceutical company producing a wide range ofquality, affordable generic medicines

• Serving in over 125 countries and has an expanding

international portfolio of affiliates, joint ventures andalliances, ground operations in 49 countries andmanufacturing operations in 11 countries

• Ranbaxy Laboratories went public in 1973 • The CEO of the company is Mr. Atul Sobti after Mr.Malvinder Mohan Singh has stepped down in May

2009



Ranbaxy Success Story

• In 1998, Ranbaxy entered US the world's largestpharmaceuticals market and now the biggest marketfor Ranbaxy, accounting for 28% of Ranbaxy's salesin 2005

• September 1999 - Ranbaxy out-licensed its first once-a-day formulation to a multinational company

• June 23, 2006 received from the U.S. Food and DrugAdministration a 180-day exclusivity period to sellsimvastatin (Zocor) in the U.S. as a generic drug at80 mg strength



About Daiichi - Sankyo

• Daiichi - Sankyo Company, Ltd was established in2005 through the merger of two leading Japanesepharmaceutical companies

• Discovery of new medicines in the areas of infectiousdiseases, cancer, bone and joint diseases, andimmune disorders

• Continuous development of novel drugs that enrichthe quality of life for patients around the world

• Presently, Daiichi - Sankyo is Japans 2nd largest drug maker

J f D ii hi S k



Journey of Daiichi - Sankyo

• 1970s, In Basle a Sankyo office was opened tokeep contact with the big Swiss pharma companies • 1985, Sankyo Europe was established in

Duesseldorf • 1988, Daiichi Pharmaceutical Europe

• 1993, established Daiichi Pharmaceutical UK, Ltd.

in London • 1990, Acquisition of Luitpold Werke, by Sankyo • 1997, company name changed from Luitpold toSankyo Pharma • 2005, Daiichi - Sankyo merger • Takashi Shoda is the president & CEO of the

company

R b A i i i



Ranbaxy Acquisition

R b A i iti



Ranbaxy Acquisition

• Ranbaxy is a well known name in pharmaceutical

company in India, with large amount of shares bothin Bombay and National stock exchange has nowsold major amount of shares to the Japanesecompany Daiichi

• Daiichi Sankyo bought out the entire promoter stakeof 35 per cent in Ranbaxy Laboratories at Rs 737per share costing $3.4 billion to $4.6 billion

• Daiichi Sankyo will hold a majority stake inRanbaxy, however Ranbaxy will continue to operateas an independent & autonomous Company.

R b A i iti



Ranbaxy Acquisition

• All management and people structures acrossRanbaxy were continue as they were. • Mr. Malvinder Singh was appointed Chairman of the

Board of Directors &member of the Senior GlobalManagement of Daiichi Sankyo ,in addition to hisexisting responsibilities as CEO & MD, Ranbaxy.

• Currently the CEO of the company is Mr. Atul Sobtifrom May 2009 onwards.

R b A i iti



Ranbaxy Acquisition

R b A i iti



Ranbaxy Acquisition

Reasons for Takeover




Daiichi Sankyo and Ranbaxy believe this transaction

provides the significant long-term value for allstakeholders through: • A complementary business combination

• An expanded global reach

• Strong growth potential

• Cost competitiveness by optimizing usage of R&Dand manufacturing facilities





The R&D pipeline was not delivering enough

products, the generic market was not generatingadequate returns • Ranbaxy had three choices,

o It could have spent lots of money in acquiring a

big generic company to grow inorganically,o merge with a global player o sell-out.

• The sell-out option was the most profitable, both for

the promoters as well as shareholder

• Daiichi is a leading, research-based pharmaceuticalcompany and this deal would enable Ranbaxy toexplore their shared capabilities in drug

development

Financial Highlights:BSE



Financial Highlights:BSE

425.80

+11.45 (2.76% )

Financials: Charting



Financials: Charting

Benefit of the Deal



Benefit of the Deal

• a win-win for Ranbaxy and Daiichi. • Competitiveness by optimizing usage of R&D and

manufacturing facilities of both companies • The combination of the two companies will giveRanbaxy access to Daiichi 's expertise in research

while the Japanese company will benefit from low-cost production on the sub-continent, amid adeepening profits crisis in Japan’s drugs industry.

• Daiichi will Gain position of major player in Generics.

Outcome of the Deal



Outcome of the Deal

• The acquisition will help Daiichi Sankyo to jump fromnumber 22 in the global pharmaceutical sector tonumber 15.

• Ranbaxy will gain easier access to the much-covetedJapanese market by operating from within the DaiichiSankyo fold, bypassing a lot of European and U.S.companies that are finding it difficult to enter the

Japanese market, where safety and testingrequirements are a lot higher

Recent progress



Recent progress

• 13% rise in annual sales, helped by a strong contributionfrom Ranbaxy Laboratories Ltd, India’s largest drug maker by revenue, which it bought two years ago.

• Daiichi’s sales increased by 16% in the US and by 28.2% inEurope. In India, revenue rose 292.8% to ¥59.9 billion,

mainly on Ranbaxy’s sales. • Ranbaxy posted a net profit of Rs 963 crore for the quarter

ended 31 March, against a loss of Rs761 crore a year ago. • Sales had improved 60% to Rs2,490 crore, as the firm for

the first time sold medicines in excess of $500 million(Rs2,255 crore) in a quarter.

Outcome of the Deal



Outcome of the Deal

• Big threat to the survival of the domestic generic

industry

• May just dampen the motivation of other Indianaspirants who want to emulate Ranbaxy's successin global Pharma

• The acquisition will help Daiichi Sankyo to jumpfrom number 22 in the global pharmaceutical sectorto number 15

• Ranbaxy will gain easier access to the much-

coveted Japanese market by operating from withinthe Daiichi Sankyo fold, bypassing a lot ofEuropean and U.S. companies that are finding itdifficult to enter the Japanese market, where safety

and testing requirements are a lot higher

Effect on Stock Market




• The share price of Ranbaxy rose 3.86% to Rs526.40 on June 9, two days before the companyannounced its buyout by Daiichi Sankyo.

• The benchmark Sensex plunged 506 points thesame day





• June 10, a day before the deal was announced, theRanbaxy scrip surged 6.52% to Rs 560.75 and theSensex fell 177 points. The stock ended almost flatat Rs 560.80 on June 11

• June 11 The reason as to why the Ranbaxy stockhad been moving against the general market

direction since it became public when the companyannounced about the sale of a majority stake in it tothe Japanese firm Daiichi Sankyo





Other Stock Sizzle



Other Stock Sizzle

• Zenotech surged 20 per cent • Religare (8.53 per cent) • Fortis Financial Services (10 per cent) • Fortis Healthcare (18.87 per cent) • Krebs Biochemicals (4.92 per cent) • Jupiter Biochemicals (13 per cent)• Orchid increased by 13.56 per cent.

Conclusion



Conclusion

• The deal is a win-win for both Ranbaxy and

Daiichi.

• For Daiichi, it was important to have some kind ofgeneric play that Novartis has with Sandoz, which

is the second largest generic company in theworld.

• Novartis is a USD 30-35 billion company. Maybe

Daiichi at the very start of that graph is trying to doexactly that.

• They have a great play in Ranbaxy, which has a

manufacturing and research base. It will also

Other Stock Sizzle



Other Stock Sizzle

References



References

• www.ranbaxy.com • www.indiamarks.com • www.moneycontrol.com • www.ndtvprofit.com • www.daiichisankyo.com

http://www.ranbaxy.com/

http://www.indiamarks.com/

http://www.moneycontrol.com/

http://www.ndtvprofit.com/



http://www.ndtvprofit.com/

http://www.moneycontrol.com/


http://www.ranbaxy.com/



THANK YOU

Ranbaxy Acquisition

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