Acquisition of Ranbaxy by Daiichi Dankyo

1. Market
Scenario
Why How Outcome
By
Akshay Miraje
Prateek Kulshreshtha
Sandeep Kumar
Maulik Shengal

2. • India represents U.S. $6 billion of the $550 billion global
pharmaceutical industry with its share increasing at 10 % a
year.
• Indian sector represents 8% of the global industry total by
volume, putting it in 4th place worldwide, it accounts for 13%
by value, and its drug exports have been growing 30 %
annually.
• The “organized” sector of India's pharmaceutical industry
consists of 250 to 300 companies, which account for 70 % of
products on the market, with the top 10 firms representing 30
percent.
Market Scenario Why How Outcome
Ranbaxy Daiichi-Sankyo
Largest in the India
8th in largest in the global
general pharmaceuticals
 Serving in over 125 Countries
 Ground operations in 49
countries & Manufacturing in 11
countries.
Strong R&D Base.
2nd largest in Japan
22nd Largest in the world
 Operations in 50
countries.
Producer of high quality
drugs

3.  Daiichi-Sankyo acquired 34.8% stake in Ranbaxy on 11th
June, 2008
 Picked up another 9.12% through preferential allotment
 It was an all cash transaction.
 Size of the deal: US$ 4.9 Billion
 As per the deal, total value of Ranbaxy was US $ 8.5 Billion.
Market
Scenario How Why Outcome

4. Market
Scenario How Why Outcome

5. • Strengthen the position of the company.
• Acquisition will provide low cost manufacturing.
• Market access to over 60 countries
• considerable cost savings in their diversification
initiatives
Daiichi-Sankyo - Benefits
• Company will become one of the top 5 in generic
business.
• Access to Daiichi’s advanced R & D facilities.
• Access to Japanese drug market
• Infusion of an additional $ 1 billion into the company.
• Surplus cash of Rs.3,000 crores flows in.
• The market capitalization goes to $8billion & the net
worth goes up.
Ranbaxy - Benefits
Market
Scenario
How Why Outcome

6. • Ranbaxy has thrived on selling off-patent drugs in the U.S.
Much more expensive proposition because of litigation
• Growing competition in generics at home and abroad
• Though Ranbaxy did well this year it missed its 2007 target
of becoming a $2-billion company
• The R&D pipeline was not delivering enough products, the
generic market was not generating adequate returns
• Ranbaxy had three choices , It could have spent lots of
money in acquiring a big generic company to grow
inorganically, merge with a global player, or sell-out.
Market
Scenario
How Why Outcome

7. • The sell-out option was the most profitable, both for the
promoters as well as shareholder
• Daiichi is a leading, research-based pharmaceutical
company
• This deal would enable Ranbaxy to explore their shared
capabilities drug development
• The investing company shall then be amongst the largest
generic manufacturers globally in terms of market share.
• Part of the problem, is that generic drug companies in
Japan are small and doctors do not trust them, by
effectively rebranding Ranbaxy generics under the well-
Market
Scenario
How Why Outcome

8. • A complementary business combination that provides
sustainable growth that spans the full spectrum of
pharmaceutical business
• An expanded global reach that enables leading market
positions in both mature and emerging markets
• Strong growth potential by effectively managing
opportunities
• Competitiveness by optimizing usage of R&D and
manufacturing facilities of both companies
• It will give Ranbaxy access to Daiichi 's expertise in
research while Daiichi will benefit from low-cost
Market
Scenario
How Why Outcome

9. • Big threat to the survival of the domestic generic industry
• May just dampen the motivation of other Indian aspirants
who want to emulate Ranbaxy's success in global Pharma
• The acquisition will help Daiichi Sankyo to jump from
number 22 in the global pharmaceutical sector to number
15
• Ranbaxy will gain easier access to the much-coveted
Japanese market by operating from within the Daiichi
Sankyo fold
• The share price of Ranbaxy rose sharply
Market
Scenario
How Why Outcome

10. • http://www.moneycontrol.com/news/business/daiichi-
acquires-525ranbaxy_362194.html
• http://www.frost.com/prod/servlet/market-insight-
top.pag?docid=88873859
• http://www.investopedia.com/university/mergers/mergers
2.asp#axzz1Xwzuwrtw
• http://www.worldpharmanews.com/corporate/1782-
daiichi-sankyo-a-ranbaxy-announce-a-new-social-
contribution-initiative