Ranbaxy & Daiichi Sankyo Co Ltd - Merger - An Intellectual Property and Business Perspective

8/20/2019 Ranbaxy & Daiichi Sankyo Co Ltd - Merger - An Intellectual Property and Business Perspective

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Ranbaxy & Daiichi Sankyo Co. Ltd. - Merger

An Intellectual Proper ty and Business Perspective

Scope e-Knowledge Center Pvt. Ltd.“Temple Tower”, II Floor, 672, Anna Salai, Nandanam,

Chennai-600 035. IndiaTel: 91-44-24314201 Fax: 91-44-24314206

Email: [email protected]

October 2008

mailto:[email protected]://www.scopeknowledge.com/http://www.scopeknowledge.com/mailto:[email protected]


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Table of Contents

1.0 BACKGROUND...................................................................................................................................................1

2.0 STRATEGIC RATIONALE ..................................................................................................................................2

3.0 COMPETITIVE STRENGTHS AND PAIN POINTS.............................................................................................6

4.0 R&D FOCUS AND PATENT PORTFOLIOS-A COMPARISON..........................................................................10

IA. PATENTS SPLIT-UP ACROSS PLAYERS.........................................................................................................13

IB. PATENTS SPLIT-UP ACROSS APPLICATION YEARS....................................................................................13

II. PATENTING FREQUENCY ANALYSIS..............................................................................................................14

III. IPC ANALYSIS....................................................................................................................................................15

IV. IPC GAP ANALYSIS ...........................................................................................................................................17

V. IPC SHIFT............................................................................................................................................................19

VI. DIRECT CITATION ANALYSIS...........................................................................................................................22

VII. THERAPEUTIC INDICATIONS ...........................................................................................................................23

VIII. ABBREVIATED NEW DRUG APPLICATION (ANDA) .......................................................................................26

IX. NEW DRUG APPLICATION (NDA) & BIOLOGIC LICENSE APPLICATION (BLA)..........................................28

5.0 PERSPECTIVES..................................................................................................................................................29

6.0 CONCLUSION.....................................................................................................................................................32


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1.0 Background

On 11 June 2008, Daiichi Sankyo Co. Ltd., the second largest pharmaceutical company in Japan,

signed an agreement to acquire the entire shareholding of the promoters (the Singh family) of

Ranbaxy Laboratories Ltd, the largest pharmaceuticals company in India. The total stake

amounted to 34.8% and Daiichi Sankyo expects to acquire another 9.4% through a preferentialallotment. The company has the option to acquire up to 20% of Ranbaxy’s voting capital through

a public offer. Through this offer, Daiichi Sankyo seeks to acquire sufficient number of

outstanding shares to obtain a majority stake in Ranbaxy, that is, a minimum of 50.1%. If Daiichi

Sankyo fails to meet with adequate shareholder response during the open offer, it has the option

to exercise a preferential issue of warrants that can increase Daiichi Sankyo’s stake in Ranbaxy

by another 4.9%.

The value of the transaction is expected to range from $3.4 billion to $4.6 billion at the rate of

$17.14 per share (INR737 per share, exchange rate: 1USD=43INR), representing a premium of

53.5% to the average daily closing price of Ranbaxy’s shares traded on the National Stock

Exchange for the three-month period ended 10 June 2008, and 31.4% premium to the last traded

price (price on 10 June 2008). Both the company boards have approved the merger and

subsequent to the closure, which is expected by March 2009, Ranbaxy is expected to be valued

at $8.5 billion and the combined entity at roughly $30 billion.

Ranbaxy will function as Daiichi Sankyo’s subsidiary but will retain its independent management

and continue to be led by its current CEO & Managing Director Malvinder Singh. Daiichi Sankyo

expects the merger to positively impact its EPS (after goodwill amortization) in the fiscal year

ending 31 March 2010 (fiscal 2010). Daiichi Sankyo will benefit from Ranbaxy’s low-cost

manufacturing infrastructure and supply chain strengths while this deal will award Ranbaxy with

access to the research and development expertise of Daiichi Sankyo to further its own growing

branded drugs business. Daiichi Sankyo is already the result of the combination of Daiichi

Pharmaceutical and Sankyo Company, a merger initiated in October 2005 and completed in April

2007.

The present study discusses the implications of the merger between Ranbaxy and Daiichi

Sankyo, from an intellectual property as well as a market point of view. This analysis is

particularly important at this point because of a variety of reasons including the growing

preference for generics, increasing dominance of emerging markets such as India, fast

approaching patent expiry etc. Also, given the fact that this involves 2 players who are among the

largest in their respective markets, the deal is of great significance .

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2.0 Strategic Rationale

Daiichi Sankyo: A boos t for mid-term management plan…

Both Daiichi Sankyo and Ranbaxy expect the transaction to create substantial synergies in thelong term. The companies benefit from their strikingly complementary businesses, which they

believe would bring considerable cost savings in their diversification initiatives, which will be

aimed at establishing a strong presence in all pharmaceutical therapeutic areas. For instance,

Daiichi Sankyo’s strength in proprietary medicine is believed to be complemented by Ranbaxy’s

leadership in the generics segment, thus providing the combined business with a broader product

base, therapeutic focus areas and well distributed risks. Additionally, both companies have a wide

global reach, which is expected to further expand after the merger. Ranbaxy’s addition can boost

Daiichi Sankyo’s position from #22 to #15 by market capitalization in the global pharmaceutical

market. Daiichi Sankyo sees this step as critical to the achievement of its objectives outlined in itsMid-term Management Plan.

As part of the plan, Daiichi Sankyo envisages to become a major global innovator by 2015, at the

back of the growth of its Olmesartan drug during the period 2007-2009. The company also plans

to expand its Levoflaxin product to export markets. Realization of synergies from the complete

integration of Daiichi and Sankyo (2005) is also a major goal of the management plan. Many new

products including the successor of its Venofer drug is expected to propel growth.

Daiichi Sankyo has targeted $13.1 billion (JPY1.5 trillion, 1USD=114.2JPY) in sales by 2015 andto increase its operating profit margin by at least 25% and overseas sales ratio by at least 60%.

Strengthening its ability to discover new drugs and bolstering its R&D pipeline also feature as

objectives in Daiichi Sankyo’s Mid-term Management Plan. The sales target for fiscal 2010 is $7.5

billion (JPY860 billion, exchange rate: 1USD=114.2JPY) and an operating profit of $2.10 billion

(JPY240 billion, exchange rate: 1USD=114.2JPY), of which 25% of its expected sales is in local

currency. Daiichi Sankyo expects that its return on equity will increase from 6% to 10% in fiscal

2010 as a result of the merger.

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Ranbaxy: Debt-free and a stronger balance sheet…

Ranbaxy envisages a broader product portfolio for itself as a result of the merger. The company

can also double up as a manufacturing base for Daiichi Sankyo’s branded drug portfolio.

Furthermore, the company will be free of existing debt as Daiichi Sankyo will be pooling financial

resources towards re-financing its entire debt. Subsequently, Ranbaxy expects to have

approximately $700 million (INR3000 crores, exchange rate: 1USD=42.8INR) as cash surplus,

which increases its book value per share from $1.7 to $4.7. Ranbaxy believes that a stronger

balance sheet will allow the company more flexibility to pursue organic as well as inorganic

growth opportunities to enhance its branded drugs business and move up the pharmaceutical

value chain.

As regards markets, the biggest gain for Ranbaxy is its smoother access to the Japanese market,

being part of Daiichi Sankyo. This will allow Ranbaxy to circumvent other US and European

players (who are currently facing difficulties with greenfield ventures due to stringent testing and

safety requirements) and establish its stronghold in the Japanese drug market. Daiichi Sankyo

foresees better acceptance for the generic versions of its off-patent drugs from Ranbaxy as there

would be better possibilities for an innovative pharmaceutical company to successfully promote

generic versions and reduced resistance from health insurers towards covering generics.

Ranbaxy also sees opportunities to strengthen its API business by working with Daiichi Sankyo

as a supply partner and thereby, optimize its SEZ infrastructure that it is developing. Enhancing

the scale of its biosimilars business in the global market is also an important milestone for

Ranbaxy from the merger. Equally important for Ranbaxy is to become the largest player in

Japan’s generic drugs market, for which the company is eyeing organic and inorganic routes.

The Daiich i Sankyo – Ranbaxy Fit

Daiichi Sankyo Ranbaxy

Source: Daiichi Sankyo

Emerging countries(Current market size:small)

HighGrowth rate

Features: High growth rateOpportunities: Enhancement ofIP protection, economic growth,

population increase

Features: Low price, highgrowth rate, large volumeOpportunities: Economic

growth, population increase

Developed countries(Current market size:large)

LowGrowth rate

Daiichi Sankyo’s core businessFeatures: Blockbuster model,

high profitability, slowing growthrate

Opportunities: Antibody drugs,personalized medicine

Ranbaxy’s core businessFeatures: Low price, high

growth rateOpportunities: Patent expiry of

blockbusters,pharmacoeconomics,biosimilars

Proprietary dru gs Non-Pro rietar dru s

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The generics cushion for market exposure risks…

Daiichi Sankyo’s unimpressive growth rate in developed markets due to saturation and the risk of

blockbuster drugs losing patent in the future can be combated by the generic manufacturing

capabilities of Ranbaxy. For example, Venofer is approaching patent expiration in the US market

and Floxin Otic has already lost patent protection. Being a proprietary drugs manufacturer, Daiichi

Sankyo was able to generate huge profits from blockbuster drugs before it began experiencing

stagnation as the branded drugs market approached maturity. However, Ranbaxy has high

growth potential in these developed markets for non-proprietary drugs in light of the impact of

pharmacoeconomics. Patent expiration (drugs with about $20 billion in annual sales are expected

to face patent expiry in 2008) has caused major companies like Daiichi Sankyo to evaluate the

costs and benefits of their drugs and synthesize more economical manufacturing methods that

can bring the same drugs to their customers at cheaper prices. Ranbaxy’s established generics

research framework will help Daiichi Sankyo realize this task and consolidate its position in

developed markets despite the threat of patent expiration. Daiichi Sankyo itself has suffered 10%

price cuts in fiscal 2007 due to the National Health Insurance (NHI) plan and many of its major

products in the domestic market did not achieve their sales targets. With more price cuts

expected in 2008, the acquisition will also provide Daiichi Sankyo with a strong, complementary

presence in the non-proprietary drug market as Ranbaxy’s generics business will balance its

exposure to market stagnation and margin risks. For example, in Japan where Daiichi Sankyo

has its largest branded pharmaceutical business, Ranbaxy is expected to further its non-

proprietary drugs business.

‘Pharmerging’ - emerging markets are Daiichi Sankyo’s fu ture growth engines…

Daiichi Sankyo also sees immense potential for growth in emerging markets, particularly Brazil,

Russia, India, China (BRIC), Mexico and Turkey (M&T), which is expected to reach $330-$430

billion by 2030. Moreover, in 2008, generic drug manufacturers and biopharmaceutical

companies are expected to aggressively adapt to these changes and capitalize on the new

opportunities that the shift will present. Thus, the most important benefit for Daiichi Sankyo will be

the access that it will gain to Ranbaxy’s presence in 21 emerging markets, out of the total of 40

locations where it is operating. This will expand Daiichi Sankyo’s global reach to 56 countries,

substantially covering major emerging markets and giving Daiichi Sankyo the opportunity to

improve its market share from the current 10% in the BRIC-M&T markets. The combined

business will have a significant position in India, Eastern Europe and Asia and one of the largest

presence in Africa.

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As regards its own proprietary drugs business, Daiichi Sankyo seeks to leverage the improved

intellectual property protection available in emerging markets and launch proprietary drugs in the

future. Ranbaxy’s emerging market reach combined with its focus on new drug areas such as

anti-malaria is expected to complement Daiichi Sankyo’s efforts. Daiichi Sankyo also expects to

leverage Ranbaxy’s affiliate company Zenotech’s expertise in the areas of biologics, oncology

and specialty injectables. Ranbaxy seeks to exploit Daiichi Sankyo’s innovation platform to further

its nascent innovative drug development segment and gain access to Daiichi Sankyo’s mature

markets that it does not already serve.

Value chain efficiency for boosting innovative pharma…

Competition in the global pharmaceutical market has led companies to rationalize their value

chains and establish efficient operations. Indian companies operating in the global industry are

characterized by their high quality and cost competitiveness combination. Through the merger,

both Daiichi Sankyo and Ranbaxy seek to optimize their manufacturing, sales and R&D assets

mainly in India and become leaner and more agile players. A balance of Ranbaxy’s autonomy

and the cooperation between the two companies is what Daiichi Sankyo believes will optimize

growth avenues of both players. To begin with, Daiichi Sankyo seeks to exploit Ranbaxy’s entire

value chain from upstream research and development to downstream marketing and sales. The

research capabilities of Ranbaxy that Daiichi Sankyo can leverage include compound synthesis,

contract research, contract manufacturing (active pharmaceutical ingredients (APIs) and clinical

trial drugs), and clinical trials and data management.

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3.0 Competiti ve Strengths and Pain Points

Ranbaxy

• Largest pharmaceutical company in India• Localized operations in 49 countries; sales in 125 countries• Sales CAGR of 16.2% in 2002-2007 based on dollar sales• Balanced geographic sales distribution• Strong expertise in intellectual property and global regulatory affairs

• 180-day marketing exclusivity for four drugs with an annual sales potential of $8

billion• “First to file” status for 18 drugs with annual sales potential of $27 billion• 98 ANDA filings pending approval

• Focus on innovative research in anti-infectives, anti-malaria, metabolic disorders, respiratory

diseases and urology• Strong alliances with major global proprietary drugs manufacturers (such as the ongoing drug

development collaboration with GlaxoSmithKline, which was expanded in 2007; and the joint

research partnership with Merck in the anti-infectives segment; the co-marketing agreement

with Ferring International for its endocrine drug; marketing agreement with Natco Pharma in

Yemen; alliances with Krebs and Jupiter for fermentation-based products and peptides

respectively)• Affiliate Zenotech’s experience in biologicals• Strong marketing expertise in one of the most competitive markets viz. India• Manufacturing efficiencies – labor, infrastructure, quality• R&D expertise – scientists, strong generics business, developing innovative drugs business,

expertise in process chemistry

Yr 2002 Yr 2003 Yr 2004 Yr 2005 Yr 2006 Yr 2007

7 4 8 9

5 7

1 1 5 8

1 1 7 9

1 3 4 3 1 6

2 4

Consolidated annual sales (CY2002 – CY2007)

Figures in $ MillionGrowth Rate: 16.2%

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Sales by region (2007)

28%

23%26%

5%12%

6%

Asia

Europe

North America

API

Other region

CIS**

Source: Ranbaxy***CIS: Commonwealth of Independent States (Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova,Russia, Tajikistan, Ukraine, Uzbekistan)

Daiichi Sankyo

• Strong presence in the Japanese prescription drugs market• Growth driver potential in blockbuster Olmesartan (anti-hypertensive), Loxonin (anti-

inflammatory) and Levoflaxacin (anti-bacterial) drugs•

Research collaborations with global pharmaceutical majors, such as the collaboration with EliLilly for developing the high-potential Prasugrel anti-platelet agent for the treatment of acute

coronary syndrome due for launch in fiscal 2008• Highly integrated supply chain network• Sales force comprising 850 medical representatives

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Daiichi Sankyo’s R&D Strategy

Daiichi Sankyo has committed a maximum of 20% of its annual sales towards research and

development. The company has hitherto conducted research only with antibody (protein-based)

drugs, which have limited applicability despite their effectiveness in the targeted location.

However, Daiichi Sankyo has now shifted its focus towards low molecular (chemical-based)

compounds, which have wider applicability, for all its new drugs. Daiichi Sankyo is also striving to

bind antibody drugs on to low molecular compounds and deliver them into the body so that the

benefit of targeted effectiveness is realized for a wider range of ailments. Daiichi Sankyo plans to

implement this approach in many of its therapeutic areas, including cancer. The shift towards low

molecular compounds is in line with Daiichi Sankyo’s integration plan that has been outlined in its

overall R&D strategy.

Daiichi Sankyo’s forthcoming activities in the cancer area include conventional low moleculardrugs as well as chemotherapy drugs. In the future, Daiichi Sankyo strives to conduct research

on molecular targets, mainly in biologicals and antibodies, and extend to low molecular-type

molecularly targeted drugs. However, many of the targets are in the early stages of the research

pipeline across therapeutic areas. This status will not allow Daiichi Sankyo’s cancer antibody

products to hit the market before 2015, by when the market for these products is likely to saturate

further. Daiichi Sankyo hopes to catch up sooner by implementing platform technology for

antibody drugs and targets through collaborations and deploying external resources.

Pain Points – Post Merger

Despite possessing many competitive advantages, Ranbaxy faces allegations by the US FDA for

repetitive fraudulent conduct. According to the FDA, Ranbaxy’s move to use APIs from

unapproved sources has resulted in the availability of misbranded and counterfeit drugs in the

market. Subsequently, the FDA questioned Ranbaxy on the potency of its drugs, which are

alleged to be adulterated, and called for an internal review of the company’s Indian manufacturing

operations. Ranbaxy has been under FDA scrutiny for about three years now and its operations

for the US market at the Paonta Sahib plant have been suspended since 2006. Although

Ranbaxy claims that this is a routine investigation and there is no cause for concern, the issuehas eroded its market capitalization significantly. As a culmination of this problem, Ranbaxy faced

a ban in September 2008 on the import of over 30 of its drugs produced in India with regards to

concerns over its manufacturing practices at a few of its facilities. Aside from this, Ranbaxy faces

patent infringement lawsuits by global branded drug manufacturers AstraZeneca and Pfizer.

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Daiichi Sankyo, at the other end, has suffered a heavy increase in selling, general and

administrative (SGA) expenses to the tune of 10% from fiscal 2006 levels to JPY357,330 million

($3128.9 million). During this period, the sales growth was a mere 0.4% and excluding one-time

effects, was still only 1.5%. Over the five-year period to fiscal 2007, Daiichi Sankyo recorded a

decline in sales by a CAGR of 0.7% while the CAGR for SGA expenses was 0.74% in the same

period. There also were unused R&D expenses to the tune of JPY8 billion ($70 million) in fiscal

2008. Although the company’s SGA expenses declined by about 9% in fiscal 2008, sales in the

year witnessed a 5% decline due to a stagnant market and sales erosion from generic drugs.

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4.0 R&D Focus and Patent Portfolios-A Comparison

An analysis of the R&D expenditure patterns of Daiichi Sankyo and Ranbaxy provides a clear

indication on the leader and the follower.

R&D Focus – Alignment with Business Growth

Ranbaxy

Ranbaxy’s research and development activities are focused towards five areas, viz., New Drug

Discovery Research (NDDR), Pharmaceutical Research, Chemical & Fermentation Research,

Herbal Drug Research, and Novel Drug Delivery Systems (NDDS). Ranbaxy’s NDDR research

program focuses on four therapeutic segments viz. metabolic diseases, respiratory diseases,

oncology and infectious diseases. In 2007, Ranbaxy’s drug discovery team filed 23 patent

applications in India. Ranbaxy also forged a global alliance with GlaxoSmithKline plc, under

which two research programs in the respiratory and anti-infective therapeutic areas respectivelyare being conducted. Ranbaxy also announced that from 1 January 2008, its research unit would

operate independently. In fiscal 2007 ended 31 March 2007, Ranbaxy filed 29 Abbreviated New

Drug Applications (ANDA) with the US FDA. Ranbaxy’s Herbal Drug Discovery division also

successfully launched two products (Chericof Herbal and Chyawan Active) in the Indian market

and three products in the international market. Ranbaxy’s Herbal Drug Discovery division alone

filed 11 patents in 2007. Ranbaxy is looking forward to making significant research developments

in specialized segments such as Biosimilars, Oncology, Oral Contraceptives, Respiratory and

Dermatology. Ranbaxy’s R&D expense and sales trends are depicted in the charts below.

Ranbaxy: R&D Expendi ture ($ mil lions, 2003-2007)

Yr 2003 Yr 2004 Yr 2005 Yr 2006 Yr 2007

5 1 . 1 7

3 . 2

1 1 0

. 5

8 5

. 5 1 0 0

. 5

Source: Ranbaxy

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Ranbaxy: Sales ($ milli ons , 2003- 2008)

0

200

400

600

800

1000

1200

1400

1600

1800

FY2003 FY2004 FY2005 FY2006 FY2007 FY20080.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%Sales of Ranbaxy (US $ Mn)

Growth Rate (%)

0

200

400

600

800

1000

1200

1400

1600

1800

FY2003 FY2004 FY2005 FY2006 FY2007 FY20080.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%Sales of Ranbaxy (US $ Mn)

Growth Rate (%)

Sales of Ranbaxy

Source: Ranbaxy

The major therapy areas of Ranbaxy are anti-infectives, cardiovascular, musculoskeletal, centralnervous system (CNS), respiratory and dermatologicals.

Daiichi Sankyo

Daiichi Sankyo already possesses high-potential products such as Olmesartan, Levofloxacin and

Pravastatin and is undertaking efforts to expand its research activity. Daiichi Sankyo is focusing

on various therapeutic areas including joint/bones diseases, allergies, immunity, cancer,

infectious diseases, glucose metabolic disorders and cardiovascular diseases. Olmesartan will

drive growth through fiscal 2010. To enhance its R&D capabilities, Daiichi Sankyo is building R&D

facilities in Europe, the US and Japan. In fact, the Daiichi Sankyo Research Institute based in the

US is expected to boost its research activity in the future. Daiichi Sankyo is also focused on

strengthening licensing activities as well as acquiring new technologies.

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Daiichi Sankyo: R&D expenditure ($ millions, FY2004-2008)

Yr 2004 Yr 2005 Yr 2006 Yr 2007 Yr 2008

1 2 9 1

1 3 4 0 1

4 0 2 1

4 5 9

1 4 3 2


Daiichi Sankyo: Sales ($ million, FY2004-2008)

7200

7400

7600

7800

8000

8200

8400

8600

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008-5.00%

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%Sales of Daiichi Sankyo (US $ Mn)

Growth Rate (%)

7200

7400

7600

7800

8000

8200

8400

8600

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008-5.00%

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%Sales of Daiichi Sankyo (US $ Mn)

Growth Rate (%)

Sales of Daiichi Sankyo


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With R&D perhaps playing the most important role in the success of these two players, it is

imperative to explore the intellectual property portfolio and the gaps that exist in greater detail.

The following sections of this report attempt to explore this facet of these companies in greater

detail.

Ia. Patents Split-up across Players

Daiichi Sankyo

39%

Ranbaxy61%

Total Number of Patents (1998-2007):883

Ib. Patents Split-up across application years

2 2

2 0

1 6

3 3

2 7

2 2

2 1

2 5

6 2

9 4

8 1 1

1 2

1 5

4 5

7 0

1 2 2

1 2 1

9 8 3

9

0

20

40

60

80

100

120

140

160

180

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Ranbaxy

Daiichi Sankyo

Total Number of Patents (1998-2007):883

A patenting frequency analysis across the application years of Ranbaxy and Daiichi Sankyo

revealed that while Daiichi Sankyo’s patenting activity peaked in 2007 (94 patent families),

Ranbaxy’s peaked in 2004 with 122 patent families respectively. Patenting activity in case of

Daiichi Sankyo has been rather mixed; with 2006 posting a whopping growth by 148% in the

number of patent families as compared to 2005.

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In contrast, Ranbaxy has witnessed a steady uptrend in its patenting activity until 2005. In 2007,

the company’s patenting activity plunged by almost 60% as against 2006. Across the ten-year

period, Ranbaxy (with 541 patent families) accounted for nearly 61% of the total patent families of

both the companies.

II. Patenting Frequency Analysis

Presence of IPC across Players

Total IPCs Total IPCs of Daiichi sankyo

Total IPCs of Ranbaxy

43 38

18

• Out of 43 IPCs’, Daiichi Sankyo has a presence in almost 88% of the IPCs.• Ranbaxy has a share of 42% of the total IPCs segment.

An analysis on the portfolio of Ranbaxy and Daiichi Sankyo revealed that the patenting activity

was spread across 43 different IPC classifications. While Daiichi Sankyo had a more diverse

technology spread and had a presence in 38 IPCs, Ranbaxy had a presence in 18 IPCs.

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III. IPC Analysis

Major IPCs for Ranbaxy Laboratories across application years

0 20 40 60 80 100 120 140

1998

1999

2000

2001

2002

2003

2004

2005

20062007

A61K

C07D

A61P

C07C

Other IPCs

IPC Code 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

A61K 4 4 6 11 16 40 75 65 29 25

C07D 4 4 3 3 17 13 28 43 55 9

A61P 3 1 5 11 7 1

C07C 1 6 3 7 5 5

Other IPCs 0 2 0 0 1 3 5 8 9 4

IPC DefinitionsA61K Preparations For Medical, Dental, Or Toilet Purposes

C07D Heterocyclic Compounds

A61P Therapeutic activity of chemical compounds or medicinal preparations

C07C Acyclic or Carbocyclic Compounds

A patenting frequency analysis for Ranbaxy Laboratories for the period 1998-2007 across IPCs

revealed 4 leading IPCs. IPC A61K (Preparations for medical, dental…) stamped its dominance

with 275 patent families, followed by IPC C07D (Heterocyclic Compounds...) with 179 patent

families. IPCs A61P (Therapeutic activity….) and C07C (Acyclic or …..) followed albeit at a distance

with 28 and 27 patent families respectively. The leading 4 IPCs (with 509 patent families) sharedalmost 94% of the total number of patent families taken for analysis.

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Major IPCs for Daiichi Sankyo Co Ltd across application years

0 20 40 60 80 100

1998

1999

2000

2001

2002

2003

2004

20052006

2007

A61K

C07D

C12N

A01N

Other IPCs

IPC Code 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

A61K 8 8 5 16 7 11 8 10 29 56

C07D 4 2 5 6 3 1 7 3 15 16

C12N 2 3 1 1 2 6

A01N 2 3 3 3 1

Other IPCs 8 5 6 8 13 7 6 11 16 15

IPC Definitions

A61K Preparations For Medical, Dental, or Toilet Purposes


C12N Micro-Organisms or Enzymes; Compositions Thereof

A01N Preservation of Bodies of Humans or Animals or Plants or Parts Thereof; Biocides

Similarly, a patenting frequency analysis for Daiichi Sankyo across IPCs for the period 1998-2007

revealed 4 leading IPCs. Here again, similar to Ranbaxy, there was no change in the first two

leading IPC categories. IPC A61K (Preparations for medical, dental…) emerged as the leader

recording a maximum of 158 patent families to its credit while C07D (Heterocyclic Compounds...)

followed with 62 patent families. Other leading IPCs included C12N (Micro-Organisms or

Enzymes…) and A01N (Preservation of…) with 15 and 12 patent families respectively. Theleading 4 IPCs (with 247 patent families) held almost 72% of the total number of patent families

taken for analysis.

IPCs A61P (Therapeutic activity….) and C07C (Acyclic or …..), which were among the leading

IPCs of Ranbaxy Laboratories didn’t figure in the leading list in case of Daiichi Sankyo Co Ltd.

Similarly, IPCs C12N (Micro-Organisms or Enzymes…) and A01N (Preservation of…) were

missing among the leading list of IPCs in case of Ranbaxy.

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IV. IPC Gap analysis

Unique IPC owned across Players

43

Total number of IPCs

25

Daiichi Sankyo only

13Daiichi Sankyo & Ranbaxy

5Ranbaxy only

43

Total number of IPCs

25

Daiichi Sankyo only

13Daiichi Sankyo & Ranbaxy

5Ranbaxy only

Number of IPCs

• Out of 43 IPCs, Daiichi Sankyo has monopoly of 58% of the total IPCs.• Ranbaxy has a share of 5 unique IPCs•

Both the players together share the remaining 13 IPCs

IPC Gap Identification

An analysis across the IPC segments for Daiichi Sankyo and Ranbaxy revealed that patent

families of these companies were spread across 43 different IPCs. Daiichi Sankyo had a unique

presence in 25 of these IPCs, while Ranbaxy had a unique presence in 5 IPCs. However, a

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review of the patents in these 5 IPCs indicates that these don’t pertain to any new drug

molecules.

Daiichi Sanky o Co. Ltd. – Uniq ue IPCs

S.No IPC Definition

1 A01C Planting; sowing; fertilizing

2 A01G Horticulture; cultivation of vegetables, flowers, rice, fruit, vines, hops, or seaweed;forestry; watering

3 A01H New plants or processes for obtaining them; plant reproduction by tissue culturetechniques

4 A01K Animal husbandry; care of birds, fishes, insects; fishing; rearing or breeding animals, nototherwise provided for; new breeds of animals

5 A01M Catching, trapping or scaring of animals; apparatus for the destruction of noxious animalsor noxious plants

6 A21D Treatment, e.g. preservation, of flour or dough for baking, e.g. by addition of materials;baking; bakery products; preservation thereof

7 A23G Cocoa; cocoa products, e.g. chocolate; substitutes for cocoa or cocoa products;confectionery; chewing gum; ice-cream; preparation thereof

8 A23K Fodder

9 A23P Shaping or working of foodstuffs, not fully covered by a single other subclass

10 A45D Hairdressing or shaving equipment; manicuring or other cosmetic treatment

11 A47K Sanitary equipment not otherwise provided for; toilet accessories

12 A61B Diagnosis; surgery; identification

13 A61L

Methods or apparatus for sterilising materials or objects in general; disinfection,sterilisation, or deodorisation of air; chemical aspects of bandages, dressings, absorbentpads, or surgical articles; materials for bandages, dressings, absorbent pads, or surgicalarticles

14 A61M Devices for introducing media into, or onto, the body; devices for transducing body mediaor for taking media from the body; devices for producing or ending sleep or stupor

15 B01F Mixing, e.g. dissolving, emulsifying, dispersing

16 C07B General methods of organic chemistry; apparatus therefore

17 C08F Macromolecular compounds obtained by reactions only involving carbon-to-carbonunsaturated bonds

18 C08K Use of inorganic or non-macromolecular organic substances as compounding ingredients

19 C08L Compositions of macromolecular compounds

20 C09K Materials for applications not otherwise provided for; applications of materials nototherwise provided for

21 C12QMeasuring or testing processes involving enzymes or micro-organisms; compositions ortest papers thereof; processes of preparing such compositions; condition-responsivecontrol in microbiological or enzymological processes

22 F16J Pistons; cylinders; pressure vessels in general; sealings

23 F26B Drying solid materials or objects by removing liquid there from

24 G01N Investigating or analysing materials by determining their chemical or physical properties

25 G06Q

Data processing systems or methods, specially adapted for administrative, commercial,financial, managerial, supervisory or forecasting purposes; systems or methods speciallyadapted for administrative, commercial, financial, managerial, supervisory or forecastingpurposes, not otherwise provided for

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Ranbaxy – Uniq ue IPCs

S.No IPC Definition

1 B07B Separating solids from solids by sieving, screening, or sifting or by using gas currents;other separating by dry methods applicable to bulk material, e.g. loose articles fit to behandled like bulk material

2 C01D Compounds of alkali metals, i.e. lithium, sodium, potassium, rubidium, caesium, orfrancium

3 C07J Steroids

4 C08G Macromolecular compounds obtained otherwise than by reactions only involving carbon-to-carbon unsaturated bonds

5 C11B Producing (pressing, extraction), refining or preserving fats, fatty substances (e.g.lanolin), fatty oils or waxes, including extraction from waste materials; essential oils;perfumes

V. IPC Shift

IPC Shift in Ranbaxy across application years

0

50

100

150

200

250

300

A61K C07D A61P C07C C07H

4131 9 7 2

234

148

19 20

13

2003 ‐2007

1998 ‐2002

IPC Code 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Total

A61K 4 4 6 11 16 40 75 65 29 25 275

C07D 4 4 3 3 17 13 28 43 55 9 179

A61P 3 1 5 11 7 1 28

C07C 1 6 3 7 5 5 27

C07H 2 1 1 6 3 2 15

IPC Definitions

A61K Preparations For Medical, Dental, Or Toilet Purposes


A61P Therapeutic activity of chemical compounds or medicinal preparations


C07H Sugars; Derivatives Thereof; Nucleosides; Nucleotides; Nucleic Acids

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An IPC analysis for Ranbaxy Laboratories in the initial period (1998-2002) established 5 leading

IPCs. The top four IPCs of this period figure among the top four IPCs in the overall period as well.

The all-time leading IPC technology A61K (Preparations for Medical, Dental …) led the list with

41 patent families. The 5 leading IPCs (with 90 patent families) contributed to almost 99% of the

total patent families in this period (1998-2002).

An IPC analysis for the period 2003-2007, identified 5 leading IPCs. The 5 leading technologies

of this period figured among the leading technologies (in a different ranking order) in the period

1998-2002 as well. The all time leading IPC; A61K (Preparations for Medical, Dental …) retained

its position in this period as well with 234 patent families. IPC A61P (Therapeutic activity…),

which was placed at the third slot in the overall period occupied the fourth slot in this period

contributing to almost 4% of the total patent families in this period. The 5 leading IPCs (with 434

patent families) contributed to almost 96% of the patent families in this period (2003-2007).

IPC Shift in Daiichi Sankyo across application years

0

20

40

60

80

100

120

140

160

A61K C07D A01N C12N G01N C07K A23L

4420

8 6 4 3 3

114

42

4 9 4 7 6

2003 ‐2007

1998 ‐2002

IPCs 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Total

A61K 8 8 5 16 7 11 8 10 29 56 158

C07D 4 2 5 6 3 1 7 3 15 16 62

A01N 2 3 3 3 1 12

C12N 2 3 1 1 2 6 15

G01N 1 2 1 2 2 8

C07K 1 1 1 1 2 2 2 10

A23L 2 1 2 2 2 9

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IPC Definitions

A61K Preparations For Medical, Dental, Or Toilet PurposesC07D Heterocyclic Compounds

C12N Micro-Organisms or Enzymes; Compositions ThereofA23L Foods, Foodstuffs, Or Non-Alcoholic Beverages


G01N Investigating Or Analysing Materials By Determining Their Chemical Or Physical Properties

A01N Preservation Of Bodies Of Humans Or Animals Or Plants Or Parts Thereof; Biocides

An IPC analysis for Daiichi Sankyo in the initial period (1998-2002) established 5 leading IPCs.

The all-time leading IPC technology A61K (Preparations for Medical, Dental …) led the list with

44 patent families. IPC G01N (Investigating or Analysing…) which was absent in the overall

period emerged as one of the leading IPCs in this period. The 5 leading IPCs (with 82 patent

families) contributed to almost 69% of the patent families in this period (1998-2002).

During the subsequent period viz. 2003-2007, there were about 5 leading IPCs. The top threeIPCs were present in the overall period (1998-2007) as well. IPC A01N (Preservation of Bodies

…) which was placed among the leading categories in the overall period was absent among the

top IPCs in this period (2003-2007). However, IPCs A23L (Foods, Foodstuffs…), and C07K

(Peptides...) which were absent among the top IPCs in the overall period has the emerged among

the leaders in this period (2003-2007). The all time leading A61K (Preparations for Medical,

Dental …) maintained its position in this period also with 114 patent families. The 5 leading IPCs

(with 178 patent filings) contributed to almost 80% of the patent families in this period (2003-

2007).

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VI. Direct Citation Analysis

Ranbaxy

A direct citation analysis for Ranbaxy identified 12 leading assignees of 514 patent familiesspread across 42 different IPC segments. Teva Pharma holds the maximum number of 19 patent

citations. Biocon Ltd and Lupin Ltd followed with 13 and 10 patent citations respectively. Other

leading assignees include Lek Pharmaceuticals Inc, Orchid Chemicals & Pharm Ltd and Pfizer

Inc with 9 patent citations each.

An IPC segment analysis mirrored the two leading IPCs of Daiichi. IPC A61K (Preparations for

Medical…) had 233 patent citations while C07D (Heterocyclic Compounds) registered about 157

patent citations. The leading 12 assignees together contributed to almost 21% of the total patent

citations of Ranbaxy. The citation also includes Daiichi Sankyo’s two patent families

(WO2001066551 & its family members- Azole compounds as therapeutic agents for fungal

infections, and WO2000015198 & its family members- Orally administered controlled drug

delivery system providing temporal and spatial control) which had cited Ranbaxy’s patent

families.

Daiichi Sankyo

A direct citation analysis of Daiichi Sankyo’s patents/applications resulted in 840 patent families

spread across 168 IPCs. The analysis identified 9 leading assignees' of which MetabasisTherapeutics Inc led the list followed by Astrazeneca AB with 11 and 10 patent citations

respectively. The other assignees include Ube Industries and Novartis AG with 8 and 7 patent

families respectively. The leading 9 assignees together shared almost 8% of the total patent

citations of the entire dataset.

Furthermore, across the IPC segments, A61K (Preparations For Medical…) and C07D

(Heterocyclic Compounds) occupied the first and the second slot in terms of maximum patent

citations with 253 and 72 patent families.

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VII. Therapeutic Indications

Ranbaxy

BloodDisordersDrugs (1)

BoneDisorderDrugs (1)

ImpotencyDrugs (2)

Hormones(1)

Uro-Genital

Drugs(1)

Anti-Malarials

(1) Dermatological Drugs (3)

Anti-Diabetics

(5)

Gastro-IntestinalDrugs (4)

1 to 5 6 to 10 More than 10

Anti-

Histamine(6)

Anti-Retrovirals

(6)

Supplements(7)

Anti- Asthmatics

(7)

Anti-CancerDrugs (9)

Cardiovascular Drugs

(16)

CNS Drugs(49)

Anti -Infectives

(34)BloodDisordersDrugs (1)


ImpotencyDrugs (2)

Hormones(1)

Uro-Genital

Drugs(1)

Anti-Malarials

(1) Dermatological Drugs (3)

Anti-Diabetics

(5)


1 to 5 6 to 10 More than 10

Anti-

Histamine(6)

Anti-Retrovirals

(6)

Supplements(7)

Anti- Asthmatics

(7)

Anti-CancerDrugs (9)


(16)

CNS Drugs(49)

Anti -Infectives

(34)

Ranbaxy-therapeutic indication

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List of therapeutic indications – Ranbaxy

Therapeutic Indications No. of compounds

CNS Drugs 49

Anti-Infectives 34

Cardiovascular Drugs 16Anti-Cancer Drugs 9

Anti-Asthmatics 7

Supplements 7

Anti-Retrovirals 6

Anti-Histamine 6

Anti-Diabetics 5

Gastro-Intestinal Drugs 4

Dermatological Drugs 3

Impotency Drugs 2

Hormones 1Anti-Malarials 1

Bone Disorder Drugs 1

Uro-Genital Drugs 1

Blood Disorders Drugs 1

Ranbaxy owns a range of 153 therapeutic drugs that are being used in 17 different therapeutic

indications globally. To its credit, it owns 49 therapeutic drugs focused on the treatment of central

nervous system (CNS) diseases such as hypertension, seizures, psychosis, depression etc. It

holds 34 active pharmaceutical ingredients for the treatment of infectious diseases. The top-selling product Co-amoxyclav (amoxicillin and clavulanic acid) is an anti-infective agent that has

generated over $89 million in 2007. In the same year the second best selling product, Simvastatin

(Simvastatin) which has generated $86 million is among the 16 drugs for the treatment of

cardiovascular diseases. Additionally, Ranbaxy has a wide range of generic drugs targeted at

different segments including, anti-cancer drugs, anti-histamines, anti-retrovirals etc.

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Daiichi Sankyo

Supple-ments (2)

SecretoryDrugs (1)


Hormones (3)


Anti-Diabetics (4)

1 to 5 More than 6

CNS Drugs(6)

Imaging &Diagnostic (7)

CardiovascularDrugs (10)

Uro-genitalDrugs (2)

Dermatological Drugs (3)

Anti-cancerDrugs (3)

Anti-Histamine (3)


Anti-Infectives

(5)

Supple-ments (2)

SecretoryDrugs (1)


Hormones (3)


Anti-Diabetics (4)

1 to 5 More than 6

CNS Drugs(6)

Imaging &Diagnostic (7)

CardiovascularDrugs (10)

Uro-genitalDrugs (2)

Dermatological Drugs (3)

Anti-cancerDrugs (3)

Anti-Histamine (3)


Anti-Infectives

(5)

Daiichi Sankyo-therapeutic indication

List of therapeutic indications - Daiichi Sankyo

Therapeutic Indications No. of Generic drugs

Cardiovascular Drugs 10

Imaging & Diagnostics 7

CNS Drugs 6

Bone Disorder Drugs 5

Blood Disorders Drugs 5

Anti-Infectives 5

Anti-Diabetics 4

Hormones 3

Dermatological Drugs 3

Anti-Histamine 3

Anti-Cancer Drugs 3

Uro-Genital Drugs 2

Supplements 2

Secretory Drugs 1

Gastro-Intestinal Drugs 1

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Daiichi Sankyo owns 60 therapeutic drugs that are distributed globally with different brand names.

Though Daiichi Sankyo covers 15 therapeutic segments, its major focus has been in the

treatment of cardiovascular diseases and imaging & diagnostics having 10 and 7 drugs,

respectively. Other focus therapeutic segments include CNS drugs, bone and blood disorder

drugs, anti-infectives etc. Notable product, Benicar/Olmetec (Anti-hypertensive drug) was the top

seller for Daiichi Sankyo in 2007.

The analysis also indicates that Ranbaxy has a wider presence across therapeutic indications

when compared to Daiichi Sankyo. Furthermore, Daiichi Sankyo does not have a presence in a

few segments such as Anti-asthmatics, anti-retrovirals, impotency and anti-malarial drugs;

segments that Ranbaxy has a presence in. Similarly, imaging & diagnostics and secretory drugs

are unique to Daiichi Sankyo’s drug portfolio. The three top selling indications of Daiichi Sankyo

(with 23 drugs) accounts to almost 23% of the 3 top selling indications of Ranbaxy.

VIII. Abbreviated New Drug Appl ication (ANDA)

1

11 1

10 1 1 11 5 4 2

3 2 1 2 33 13 3 7 1

1 1 11 1 4 2 6 11 2 1 101 2 1 1 3 2 1

21 2 1 2 21 2 1

4 2 5 7 1 11 1 1 7 1 6 4 4

1 4 1 12 1 1 1 3 3 23 6 3 6 4 23 6 1 5 7 6

1 1 2 1 4 6 2 1

0 4 8 12 16 20 24 28

200320042005200620072008

20032004200520062007200820032004200520062007200820032004

2005200620072008

D a

i i c h i s a n

k y o

R a n

b a x y

B a r r

P h a r m a c e u

t i c a

l s

T e

v a

P h a r m a

Anti-Asthmatics Anti-cancer Drugs Anti-Diabetics Anti-Histamine Anti-Infectives Anti-Malarials Anti-retroviralsBlood Disorders DrugsBone Disorder DrugsCardiovascular DrugsCNS DrugsDermatological DrugsGastro-Intestinal DrugsHormonesOther indicationsSupplementsUro-genital Drugs

Abbreviated New Drug Application (ANDA)

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An analysis of the Abbreviated New Drug Applications approved for Ranbaxy and Daiichi Sankyo

by US FDA (as on 6th sep’08) for the period of Jan’03-Sep’08, revealed that the drugs approved

for Ranbaxy span across 8 therapeutic segments while Daiichi Sankyo’s spans across 3

therapeutic segments.

Both Ranbaxy and Daiichi Sankyo hold the maximum application approvals for Anti-Infectives and

Central Nervous System Drugs. However, Ranbaxy leads in the case of Anti-Infectives and CNS

Drugs segments with 24 and 14 approved drugs. The analysis also indicates that Ranbaxy has a

presence in therapeutic segments such as Anti-Diabetics, Anti-Histamine etc, wherein Daiichi

Sankyo has not filed/no drug approvals in the period (2003-2008).

A comparison of this activity with some of the peers provides interesting details. Teva

Pharmaceuticals holds the maximum ANDA approvals of 144 drugs spread across 13 therapeutic

indications. Of these, Anti-Infectives and CNS Drugs represent the majority share with 35 and 33FDA approved drugs respectively. The unique therapeutic indications held by Teva

pharmaceuticals as compared to Ranbaxy and Daiichi Sankyo in this period include Hormones,

Gastro-Intestinal Drugs etc,

Similarly Barr Pharmaceuticals hold 54 ANDA approvals filed across 15 therapeutic segments.

The hormones and CNS Drugs segments lead the list with 21 and 13 drugs respectively. Unique

segments of Barr Pharmaceuticals include Hormones, Uro-Genital Drugs and Bone Disorder

Drugs.

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IX. New Drug Application (NDA) & Biologic License Application (BLA)

1

2

2 2

1

1

1

Ranbaxy Daii chisankyo

TevaPharma

CNS Drugs


Ant i-Asthmatics

Ant i-In fectives


Ant i-Histamine

Ant i-Di abeti cs

New Drug Application (NDA) & Biologic License Application (BLA)

An analysis across the New Drug Application and Biologic License Application approvals by US

FDA (as on 6th sep’08) for the period of Jan’03-Sep’08 indicates 3 drug applications approved for

Ranbaxy (Anti-Histamine: 2 approvals, Anti-Diabetics: 1 approval) and 2 for Daiichi Sankyo

(Cardiovascular Drugs).

Teva Pharmaceuticals registered a maximum of 5 NDA and BLA approvals spread across 4

segments in this period. Anti-Infectives lead the list with 2 approved drugs, while Anti-Asthmatics,

Cardiovascular Drugs and CNS Drugs had one drug each.

However, Barr Pharmaceuticals did not show any drug approval in the corresponding period.

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5.0 Perspectives

The Daiichi – Sankyo merger – a strong precedent but with its own challenges!

The takeover of Daiichi Pharmaceutical by Sankyo Company in October 2005 resulted in the

reverse merger of Sankyo and Daiichi. Daiichi Sankyo, as a combined entity acquired

considerable strength after the merger by achieving critical mass in R&D both in the domestic

Japanese as well as international markets, and also became the second largest pharmaceutical

player in Japan. However, the worldwide integration of the two companies took place only in April

2007, after an 18-month long integration process. This was very much in line with what Sankyo

had envisaged way back in late 2005 when it launched its first Mid-term Business Management

Plan. Both companies did not envisage complete integration soon after the merger because their

focus remained on first integrating their prescription businesses. The integration of the other

businesses was the second priority as the main focus was on bringing to market some of its most

important drugs such as the antibiotic Levofloxacin and the anti-hypertensive drug Olmesartan.

The secondary objective was to expand into international markets.

However, in fiscal 2007, Daiichi Sankyo was unable to generate complete sales synergies and

faced significant setbacks in marketing. The company failed in its efforts to completely reorganize

its medical representatives’ base to create what it calls an “MR Crosswise” structure, which was

to serve as the basis for its growth in fiscal 2008. Already in the third year of its management

plan, the company is operating in a difficult business environment and needs to strengthen its

foundation significantly to achieve its targets for fiscal 2010. Daiichi Sankyo is already pouring

investments into expanding its sales force in Europe and the US as well as strengthening its

foothold in Latin America and Asia. As the Olmesartan drug is the company’s growth enginethrough fiscal 2010, investments are centered on this product.

The next challenge of Daiichi Sankyo is to develop new drugs that will boost its growth through

future generic erosion periods, in the medium and long term. Also, the company has expressed

its need to enhance its operating efficiency (13.7% operating margin in fiscal 2007) to be on par

with industry leaders such as GlaxoSmithKline, Bayer Schering and AstraZeneca, who have

recorded operating margins upwards of 20%. There is significant improvement needed in Daiichi

Sankyo’s cost structure by concentrating on procurement enhancement, global supply chain

efficiency. In light of the complete integration, Daiichi Sankyo faces a critical challenge viz.consolidating its management framework to optimize group resources and integrating the culture

of Daiichi and Sankyo.

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Merger Motives: Reducing dependence on branded d rugs…

Beginning 2008, the cost of drug treatments is expected to decline particularly in the US market

across various therapeutic areas (largely due to the impending patent expiration of key drugs).

This will cause generic drugs across these therapeutic areas to seize a substantial market share.

Some significant generic areas include calcium channel blockers, lipid regulators, osteoporosistherapies, proton pump inhibitors and selective serotonin reuptake inhibitors. Generics are seen

to pervade most pharmaceutical markets in the world, with over 65% of prescriptions written in

the US expected to be generic drugs. The use of generics is also driven in various other countries

through initiatives such as new government contracting in Germany and generic educational

programs in Italy, Japan and Spain. Competition in biogenerics is also expected to rise.

In light of these transitions in the global pharmaceutical marketplace, large and small innovators

are striving to devise strategies to align themselves better with the new opportunities – realizing

the generic and emerging market potential. Major pharmaceutical innovators have adopted theobvious strategy of strengthening their drug pipelines with more focused discovery and

development initiatives including combination therapy and targeted drug development, as well as

incorporating better product lifecycle management tactics. At the same time, these large players

have sought to reduce their dependence on prescription pharmaceutical drugs for growth and

have made a large number of expensive acquisitions of / or collaborations with successful or

high-potential generic drug manufacturers. Thus, Daiichi Sankyo’s acquisition of Ranbaxy signals

a move on the lines of its global counterparts Novartis (which acquired Alcon, Sandoz, Hexal AG

and Eon Labs) and local competitors Astellas Pharma, Eesei and Takeda Pharmaceutical.

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Managing the intangibles …

The immediate risk that both Ranbaxy and Daiichi Sankyo face is the possibility of a disparity in

company cultures, which could pave the way for fallout in the future. Aside from the working

cultures in the two countries, business cultures of both the companies are very different. Also, the

past acquisitions of generic drug companies by innovators have resulted in both companies being

operated as independent entities rather than merging the individual cultural frameworks. Hence,

Daiichi Sankyo’s plans for operating Ranbaxy as an independent company and its non-

involvement in Ranbaxy’s inorganic growth initiatives will probably work well for both companies.

Nevertheless, some integration will be inevitable to expand the scope of the companies’ research,

manufacturing and marketing functions in order to realize synergies and gain a strong pan-global

position. This will likely result in a future-Ranbaxy that is less Indian in its outlook but more of a

first-world economy company. The new Ranbaxy will possibly be imparted with more caution and

deliberation, which are characteristics of Japanese players.

The merger announcement has come immediately after Ranbaxy’s settlement of its patent

dispute with AstraZeneca regarding the generic sales of the latter’s blockbuster ulcer drug

Nexium in favor of the latter. Also, Ranbaxy made an out-of-court settlement with Pfizer recently

over the Lipitor drug. Although the settlement with Pfizer delayed Ranbaxy’s launch of generic

Lipitor, it has provided Ranbaxy with the status of exclusive generic representative of Pfizer and

the license for early launch in some of the global markets. The settlement has also provided

Ranbaxy with a lot of certainty in the timeframe for the launch of generic Lipitor and has brought

down its estimate of future litigation expenses. Although Ranbaxy began negotiating with Pfizerand AstraZeneca much earlier, the recent settlements reflect Daiichi Sankyo’s possible influence

and facilitation of well-timed moves.

The Ranbaxy-Daiichi Sankyo deal also unveils the need for the companies to consolidate their

intellectual capital and acquire an edge over their foreign counterparts operating in, to begin with,

the Indian market. The deal is already viewed as an indication of Japanese companies displaying

confidence in Indian pharmaceutical firms with a reinforced faith in the commitment of Indian

players towards intellectual property rights. With Ranbaxy under its umbrella, Daiichi Sankyo is

poised to share Ranbaxy’s leadership in the Indian pharmaceutical market in terms of patentfilings by homegrown companies. The next challenge for Ranbaxy is to take on competition from

foreign rivals such as AstraZeneca, Pfizer, Novartis and Merck in filing patents in India.

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6.0 Conclusion

Daiichi Sankyo’s move of acquiring Ranbaxy will enable the company to gain the best of both

worlds without investing heavily to the generic business. It is Daiichi Sankyo’s way of doubling the

benefits or at least covering the shortcomings in the outcome of Sankyo’s acquisition of Daiichi –

by gaining access to an innovative platform covering biologicals and anti-cancer drugs, and avast pool of scientists – all at Indian costs. Through the deal, Ranbaxy has become part of a

Japanese corporate framework, which is extremely reputed in the corporate world. As a generics

player, Ranbaxy is very well placed in both India and abroad although its share performance

belies its true potential. Ranbaxy is also an emerging branded drug manufacturer possessing

tremendous clout in terms of strategic alliances with some of the biggest players in the industry.

The extent to which Ranbaxy and Daiichi Sankyo are complementary is rather unique in the

industry. Unlike several mergers where removal of redundant assets and practices is mandatory,

Ranbaxy and Daiichi Sankyo complement each other across geographies as well as product

portfolios, leaving very little need for rationalization, thus minimizing post-acquisition hurdles.

Furthermore, Japan is fast embracing generic drugs and in light of the growing ageing population

in the country, Daiichi Sankyo’s propulsion of Ranbaxy’s generic drugs will expand its Japanese

market.

Given Ranbaxy’s intention to become the largest generics company in Japan, the acquisition

provides the company with a strong platform to consolidate its Japanese generics business, an

important market of its largest geographic segment, Asia. Many of Ranbaxy’s counterparts,

including Zydus Cadila and Lupin Ltd., have entered Japan with the same intention through

acquisitions of smaller Japanese players or greenfield ventures.

However, the recent ban on the US imports of more than 30 Ranbaxy drugs manufactured in

India until concerns are allayed poses a risk to Ranbaxy’s growth in the US and in turn, its

international markets. The company’s US sales are estimated to be impacted by 10%-15% as a

result of the ban. While Daiichi Sankyo has stressed that it going ahead with the deal, it does

raise some concerns over the impending benefits and has in fact already affected Ranbaxy’s

share performance in September 2008.

For the present, Ranbaxy remains a company burdened by debt and litigation expenses and no

incentive for innovation thanks to drug policies in the domestic market. The deal will make

Ranbaxy a zero-debt company. In the long term, Ranbaxy stands to gain in its mission to become

a leading global innovative pharmaceutical company, which will be propelled by the acquisition.

The move represents a step towards aligning with the paradigm shift happening in the global

pharmaceutical industry. The acquisition corroborates the strong possibility for similar moves in

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the future as more innovative pharmaceutical companies are displaying a zeal for entering the

generic business. The deal is also said to improve the engagement between India and Japan and

foster greater cooperation between the two nations in the pharma arena. The Daiichi Sankyo deal

also sets the tone for more Japanese companies displaying confidence in Indian pharmaceutical

firms and reinforces their faith in the commitment of Indian players towards/ and respect for

intellectual property rights. Global companies are reassured that Indian patent laws are becoming

robust and homegrown Indian pharmaceutical giants might now have a chance to become

national leaders with the backing of foreign parent companies that respect their independence.

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Annexure – Patent Analysis Methodology

The following methodology was adopted for analyzing the retrieved patent documents. All patent

documents have been downloaded from the MICROPAT database for the 10-year period (Jan 1998 to

Feb 2008) .

Patent portfolio com parison

Analysis and comparison of patenting activity of Ranbaxy, and Daiichi Sankyo Co Ltd

Patenting activity - 10 years

Patent documents filed during the last 10 years (Jan 1998 to June 2008) by Ranbaxy and Daiichi Sankyo,

along with their subsidiaries were taken for analysis. Only one member per patent family was considered

for analysis. Preference for one member per family was based on the following order; US grants – US

applications – PCT – EP publications – EP grants – JP – GB. Micropatent database was used to retrieve

the patent related data and Delphion was used to retrieve the subsidiary list for each company.

Collection of Patent documents

Patent portfolio of the 2 companies retrieved for the last 10 years indicates a total of 1,796 patentdocuments filed by Ranbaxy and Daiichi Sankyo in various technology spaces. A drill down of these

patent documents indicates that Daiichi Sankyo had 567 patent documents while Ranbaxy had 1,229

patent documents. All subsequent analysis was performed based on this initial dataset of 1,796.

One member per family

Each invention could have more than one patent, as it could be filed in more than one country. Such an

evaluation inclusive of family members may distort the analysis. For instance, the IPC of a patent

document with high number of family members may rank at the top of the IPC frequency list instead of theIPC which has more number of individual patent documents. Therefore, the 1,796 patent documents were

reduced to one member per family using Micropatent database. This resulted in a total of 883 patent

families shared by the companies as follows: Daiichi Sankyo – 342 and Ranbaxy – 541 .

Data points such as patent number, publication year, application year, assignee and primary IPC code

were also obtained from the Micropatent database for the family reduced dataset prior to performing the

IPC trends analysis.

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Patent Split-up

The overall patent portfolio of the two companies was analyzed across 10 years to determine the

patenting activity of the companies irrespective of technology and years. In addition, a company-wise

patent split-up across years was also identified and is graphically represented.

Patenting Frequency An alysis

This analysis indicates the patenting activity of Ranbaxy and Daiichi Sankyo Co Ltd across various

technology spaces with respect to the application years (1998-2007). Given, the rather huge data set that

needed to be visually represented, patenting frequency in the top IPCs were projected in the graph while

the other IPCs were categorized in “other IPCs”.

Leading IPCs

The leading IPCs for both the companies were sorted and analyzed across years. The 10 year period

was split into two time periods (1998-2002, 2003-2007) to identify any possible shift in technologies for

the companies; thereby indicating the focus technology space of each company in two given time periods.

R&D Expenditure

Research & Development expenditure of Ranbaxy and Daiichi Sankyo from 2002 to 2007 was retrievedfrom the respective “annual reports” of each company. The R&D expenditure of Daiichi Sankyo for the

years 2002 to 2005 was a simple aggregation of the R&D expenditure of Daiichi and Sankyo.

IPC Gap Analysis

The similarities and gaps in the technology space between the two companies were identified by

screening the IPCs (primary IPCs) which were common to both the companies. The analysis identified 13

IPC segments shared by both the companies while the patents filed under the remaining 30 IPC

segments were owned by one of the 2 companies. An analysis of this data was used to identify the gapsin the technology.

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Patenting activity across technol ogies and IPC shift

Patenting activity of Ranbaxy and Daiichi Sankyo for 1998 – 2007 was clustered with respect to

technologies. Technology wise patenting activity of the two companies across the years was analyzed

using IPCs. The IPCs pertaining to each company was then sorted with respect to application years to

indicate technology wise patenting activity in each year for the two companies. The major IPC shift across

various time periods was also analyzed.

Citation Analysis

Direct citation frequency analysis was conducted for the patent documents (along with its family

members) of both Daiichi Sankyo and Ranbaxy. The analysis was conducted to identify the assignees

that have cited the source company’s patent documents.

Therapeutic Indication s

Therapeutic drugs possessed by Ranbaxy and Daiichi Sankyo were retrieved from the respective

company websites and other available free web sources. Each therapeutic drug was clustered in a broad

segment based on their application and taken for analysis. A total of 153 and 60 therapeutic drugs were

obtained for Ranbaxy and Daiichi Sankyo, respectively.

Product Pipeline

Pipeline details for Ranbaxy and Daiichi Sankyo was retrieved from their company websites, annual

reports, presentations, along with additional free web databases on pharmaceutical product pipeline, as

available.

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PROCESS FLOW CHART

PatentSplit-up

IPC ShiftIPC Gap Analysi s

R&DExpenditure

IPC Analysi s

Citation Analy si s

PatentingFrequency Analysi s

Reduction to one member per family

Collection of Patent doc uments

Patent activit y – 10 years

NDA / ANDA TherapeuticIndications

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APPENDIX I – ABOUT SCOPE e-KNOWLEDGE CENTER

Scope e-Knowledge Center is an award-winning provider of intellectual property support services. Clients

include large corporate organizations (including seven FTSE 100 companies), Thomson Scientific, the

European Patent Office, global law firms and several of the largest technology transfer companies in theworld.

Scope helps clients to enhance their IP capabilities and achieve substantial cost savings, in region of 40

to 60%. Services include:

Patent searching : Prior art, validity, infringement, freedom to operate, etc. For example, Scope

undertakes complex searches on a regular basis for corporates in various sectors including engineering,

pharma, food & beverages, chemicals, etc.

Patent analysis for competitive intelligence and bus iness development : Leveraging on its expertise

in business research support, Scope enables clients to understand better their market environment and

identify profitable opportunities through a variety of bespoke studies, including: white space analysis of

specific technology areas; identifying potential licensing candidates; patent / CI landscape analysis;

overlap analysis to determine potential out-/in-licensing & cross licensing, opportunities, etc.

Database enhancement for patent portfolio management : Scope helps clients to make the most of

their internal patent and information repositories, leveraging on its world-class in database building and

information architecture.

Tracking and monitori ng patent applications / status on a bespoke basis . Scope keeps track of any

new patent applications in specific technology areas or filed by specific companies. It also monitors the

legal status of specific patent applications (ie maintenance of surveillance lists).

Scope e-Knowledge Center has been in operation for over 20 years. It is headquartered in Chennai, India

and has several sales offices around the world. You can reach us at:

Contact us:

Headquarter USA UK Netherlands

R.SivadasCEOTel:+91 44 [email protected]

Ani ndy a Panda Asst. Business Development ManagerTel:+91 44 24314201(M) +91 98846 [email protected]

Ken BozlerSenior Vice President of Sales(M) +1 [email protected]

Andrew PetersonExecutive – IP & Research Sales(M) +1 [email protected]

Hector BolañosGeneral ManagerTel: +44 20 7096 0493(M): +44 7880 [email protected]

Ms. Priya SinhaBusiness DevelopmentManagerTel / Fax: +31 (0) 357511 [email protected]

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Disclaimer

This material is based upon information that we consider reliable, but we do not represent

that it is accurate or complete, and it should be relied upon as such.

Neither SCOPE e-KNOWLEDGE CENTER PRIVATE LIMITED nor any person connected

with it accepts any liability arising from the use of this document.

Opinions expressed are our current opinions as of the date appearing on this material only.

While we endeavor to update on a reasonable basis the information discussed in this

material, there may be regulatory, compliance, or other reasons that prevent us from doing

so.

No part of this material may be duplicated in any form and / or redistributed without the prior

written consent of SCOPE e-KNOWLEDGE CENTER PRIVATE LIMITED ™

Ranbaxy & Daiichi Sankyo Co Ltd - Merger - An Intellectual Property and Business Perspective

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