Intellectual Thoughts by Sanjay Panda: Daiichi acquires Ranbaxy

Daiichi acquires Ranbaxy

Daiichi Sankyo Co. will buy a controlling stake in India's Ranbaxy Laboratories Ltd. for up to $4.6 billion to enter the generic-drug market, where sales are growing twice as fast as branded medicines.

Daiichi Sankyo, Japan's third-largest drugmaker, will acquire more than 50.1 percent of Ranbaxy, India's biggest pharmaceutical company, for 737 rupees a share.The purchase propels Daiichi Sankyo into the top 10 companies in the $120 billion generic-pharmaceutical market, which grew 11 percent last year, compared with 6 percent for all drugs.

Daiichi Sankyo is paying about 4.7 times Ranbaxy's sales in the acquisition.That compares with 2.7 times that Mylan Inc. paid last year when it bought Merck KGaA's generic unit for 4.9 billion euros ($7.6 billion).

The acquisition will allow Daiichi Sankyo to have a better reach into emerging markets, including India, China and Eastern Europe,'' where the pharmaceutical market is growing at a rate of more than 10 percent, the company said in a statement.

The Japanese pharmaceutical market will grow 1 percent to 2 percent this year. Global industry growth will be 5 percent to 6 percent next year.India's pharmaceutical market may expand by more than 12 percent a year.

The Ranbaxy purchase gives Daiichi a company that manufactures and sells drugs in 56 countries from the current 21. It follows Daiichi's takeover of German biotechnology company U3 Pharma AG for 150 million euros on May 21 to gain cancer treatments.

Ranbaxy has purchased seven companies in the past two and a half years, including Romania's Terapia SA. The company has been built over the past three decades by copying blockbuster drugs such as Merck & Co.'s Zocor cholesterol treatment drug and selling them for a fraction of the price in countries including France, Germany and the U.S.

Medical costs will swell 70 percent to 56 trillion yen by 2025 from 33 trillion yen in 2005, the government estimates. Japan wants generics to account for 30 percent of prescriptions by 2012 from 17 percent to save about 500 billion yen.

Policies favoring the use of generic drugs are also luring foreign companies, including Teva and Mylan Inc. Petah Tikva, Israel-based Teva, the world's largest generic-drug maker, is hiring as many as 193 people in Japan this year.


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