E-Paper
Just what the doctor ordered
If one resists the temptation from looking at l’ affaire Ranbaxy through a nationalist prism, it is clear that its acquisition is a win-win situation for both companies.
Globalisation is a two-way street. Just as India Inc seeks a place in the global sun through mergers and acquisitions, the international biggies, too, are eyeing promising targets here. Following Britain-based Vodaphone’s $11 billion acquisition of Hutchison-Essar, the Japanese Daiichi Sankyo’s $4.5 billion takeover of a majority stake in India’s pharma giant Ranbaxy follows suit as one of the biggest sell-offs. Speculation is rife that this deal may trigger more hostile bids for other local pharma companies that, like Ranbaxy, have proven capabilities in the generics space that entails flooding the global markets with cheaper versions of drugs that go off patent.
If one resists the temptation from looking at l’ affaire Ranbaxy through a nationalist prism, it is clear that its acquisition is a win-win situation for both companies. India’s homegrown MNC had a vision statement of being a research-based international pharmaceutical company. Ranbaxy was certainly headed in that direction, but it faced strong obstacles along the way. Its financials have not been strong; the company was also an under-performer in the bourses. Ranbaxy also has had to engage in costly legal battles in its forays into the US generics market. Post-takeover, the combined entity becomes the world’s 15th largest pharma company.
Daiichi Sankyo gets access to a giant that has a presence in 150 markets and has a strong portfolio of generics. This deal may become a trendsetter. The combined group, thus, represents a ‘hybrid’ of Daiichi Sankyo’s and Ranbaxy’s strengths. This mix has so far been witnessed in the case of Switzerland’s Novartis-Sandoz. With demand in the $120 billion global generics business set to expand at double the rate of the patented pharma market, the industry may see greater consolidation in the days ahead with many more such hybrid combinations.
