Japan High on Indian Drugs

Ranbaxy CEOBy Priya Nigam

Ranbaxy Laboratories CEO Malvinder Mohan Singh would now be taking someone else’s company to greater heights! No, I don’t mean he’s resigned as Ranbaxy’s CEO. In a deal that is quite shocking, the Singh family has sold its complete stake in India’s largest pharmaceutical company to Japan’s Daiichi Sankyo.

Before going into the details of the deal, let me build some emotional background to the story. Ranbaxy was taken over by Bhai Mohan Singh when his cousins who had set up the company (Ranjit and Gurbax - hence the name Ranbaxy) could not pay back a loan. The company made progress. Bhai Mohan Singh was succeeded by his son Parvinder Singh. Ranbaxy not only become the largest Indian drugmaker, but also one of the world’s top ten generic companies. It has a presence across the globe, exporting to about 125 countries and having manufacturing facilities in seven countries. And now Malvinder Mohan Singh, the elder son of Parvinder Singh and the CEO and MD of Ranbaxy, has sold the entire family stake (34.8%)!

Daiichi Sankyo Co Ltd will now hold a total stake of 50.1% in the Indian drugmaker for between $3.4 billion and $4.6 billion. The deal would significantly boost the overseas prescription drug business of Japan's second-largest drugmaker. For this, Daiichi Sankyo has offered a 30% premium over the current market price to buy out Ranbaxy’s promoters.

Although Malvinder Mohan Singh gets to pocket around Rs10,000 crores for the stake sale, it’s not a happy thought. Ranbaxy was one Indian company that was really making its presence felt in the overseas market. And there were many that had dreams of emulating the pharma giant’s global progress.

Ranbaxy was not seen as an acquisition target by the market. It has been doing well lately (including entering research alliances with the likes of GlaxoSmithKline) and its share price has been rising since the beginning of this year. So, it was rather surprising to be hit by this news. And what happens now to the companies in which Ranbaxy has a stake? The list is fairly long. It has a stake of around 15% in Krebs Biopharma, Jupiter Biosciences and Orchid Chemicals & Pharmaceuticals Ltd. Also, it holds close to 47% of Zenotech Labs and a majority stake in Fortis Healthcare and Religare Enterprises.

There is now widespread speculation of more deals in the pharma industry. There are going to be a number of patent expiries over the next four years. We could well see pharma majors looking to acquire more generic drug manufacturers in the near future.