Ranbaxy sees bright future in ageing Japan

The head of India's generic drug leader Ranbaxy, who has agreed to a takeover by Tokyo-based Daiichi Sankyo, said on Thursday he saw a bright future in Japan as its population gets older.

Malvinder Singh, the grandson of the founder of Ranbaxy Laboratories, said he expected a growing market for generic drugs as Japan tries to cut down on burgeoning medical costs.

"I think a healthy change is happening in Japan. Clearly the government wants to encourage more generic prescriptions and have generics take a higher percentage of the pharmaceutical market," Singh told a meeting with analysts and journalists in Tokyo.

"This will evolve over time. This is going to happen slowly. But it is going to happen for sure," said Singh, who would stay on as Ranbaxy chief executive.

The Japanese firm plans to spend up to 4.6 billion dollars to buy Ranbaxy, expanding Daiichi Sankyo's market presence from 21 to 56 countries.

Unlike Ranbaxy, Daiichi Sankyo has so far focused on marketing patented drugs in developed markets, where the pace of growth is slowing.

"As an industry professional, I have watched with great interest the Indian market and Ranbaxy. We approached them last year about this deal," President and Chief Executive of the Japanese firm, Takashi Shoda said.

Risk evaluator Moody's Investors Service placed Daiichi Sankyo's Aa3 issuer rating on review for a possible downgrade, saying the cost of the deal could affect the Japanese firm's net cash position.

But it said the transaction "would enhance the growth potential of Daiichi Sankyo, especially in the generic pharmaceuticals sector and emerging markets."

"Moody's believes that the possibility of a multi-notch downgrade to Daiichi Sankyo's final rating is very limited because the company has ample liquidity to support the major part of the financing of the acquisition," it said.

"Its strong cash flow from operations may also allow it to restore its financial profile once the acquisition has been completed.