Daiichi Sankyo should be out from under Ranbaxy Laboratories by the end of the year. The Japanese drugmaker today released its road map for the $3.2 billion all-stock deal with Sun Pharmaceutical and the mile markers it sees to completion. It also provides some ideas for drugmakers with products facing Ranbaxy generics of how quickly its revamp by Sun might put them in peril.
Sun Pharma said this week it would buy the troubled Indian drugmaker, fold it into its own operations to create the fifth largest generic drugmaker globally and then set about repairing its damaged reputation. It said it had secured the buy-in not only of Daiichi Sankyo, which owns about 63% of Ranbaxy, but also of a majority of the other Ranbaxy shareholders. When the deal closes, Daiichi will be Sun Pharma's largest shareholder with about a 9% ownership and will be able to name one member to the Sun board of directors.
Daiichi said on Friday that it expected India's securities exchanges to sign off on the corporate coupling by the end of June. In August, the boards of Sun and Ranbaxy are expected to give formal approval. It said by the end of the year, it looks to have in hand approvals from the high courts in India and "other regulatory agencies."
Sun Pharma has a road map of its own for how quickly it might extract value from the deal after it closes. Sources have said that it replaces the management at the four plants the FDA has banned from shipping to the U.S. Once it can show some improvements, it will invite the FDA and other regulators in for a "confidence building" tour, just to illustrate it is on the right track. They have also said that Sun will over time phase out the tainted Ranbaxy brand in the U.S., replacing it with the Sun Pharma moniker instead.
Sun has yet to say whether it has ideas about how to take advantage of the first-to-file generic drug approvals that Ranbaxy already has in hand but has been unable to act on because FDA bans have cut off access to the U.S. from the plants where those were to be made. That includes Novartis' ($NVS) heart drug Diovan, which has been off patent since September 2012. There is also AstraZeneca's ($AZN) blockbuster stomach upset drug, Nexium, which goes off patent next month. There were reports that Ranbaxy had been seeking approval to use its remaining FDA-approved plant in New Jersey as a workaround and looking for outside suppliers for the APIs. Whether Sun will try to get the Ranbaxy plants in place quickly to launch those copies, or whether one of its own plants might be able to pick those up, has not been discussed.
Unless Sun and Ranbaxy have something else up their sleeves to get those drugs on the market, Novartis and AstraZeneca look to be sitting in a much safer position until the deal gets done. Sales of Diovan and Diovan HCT came in at $3.5 billion last year. That was off 20% year over year but a lot higher than Novartis had expected. For AstraZeneca, Nexium is even more important. The drug is among AstraZeneca's top sellers, with $3.87 billion in 2013 sales, $2.12 billion of that in the U.S. That's about 21% of the drugmaker's sales in the region.
- check out the announcement