Sun Pharmaceutical Ltd Permitted To Acquire Ranbaxy

Ranbaxy will have to sell its right for a drug in order to be acquired by Sun Pharmaceuticals.

Sun Pharmaceutical Industries Limited filed a request after which it has gained US antitrust authority’s approval to acquire Ranbaxy Laboratories Limited.

Sun Pharmaceutical has announced on April that they plan on purchasing Ranbaxy (NSE: RANBAXY) and were waiting for the Federal Trade Commission’s approval. Although now they have been given consent to go ahead with the deal, FTC has also implemented a condition that Ranbaxy will sell its generic minocycline antibiotic, which is used for treating various infections such as pneumonia, urinary tract infections, and acne, to Torrent Pharmaceuticals.

According to FTC, there are only 3 pharmaceutical companies in US who are currently producing the drug. Since Sun Pharmaceuticals is also in the process of introducing a similar drug, this would have led to decreasing prices. By selling Ranbaxy’s drug rights to Torrent Pharmaceuticals, Sun’s competitors will have a fair chance to compete, since then Sun won’t be able to dominate the market.

Ranbaxy has previously been in trouble with Food and Drug Administration (FDA) over safety concerns. The agency had banned its products in US, in order to protect US consumers from using second-rate products, after it found that some of the company’s plants were not following the manufacturing practices set by the authority.

Sun Pharmaceuticals (NSE: SUNPHARMA) would acquire Ranbaxy for $3.2 billion. Together, they are expected to generate revenue of $4.2 billion per year.

The shareholders of Ranbaxy Laboratories are expected to get 0.8 of the shares of Sun Pharmaceuticals after the merger gets completed. This merger of the two pharmaceutical companies is going to result in creating the fifth largest company to be working towards the creation of specialized generics in the world. However, in India, the company will be the largest company of its kind. The collaboration of both the companies is going to prove as a positive step towards the growth of this new venture of the two pharma companies.

On the other hand, this team consisting of Sun Pharma and Ranbaxy will be working to produce products that will be complex and the merger will also look into exploring and exploiting fields that have not been exploited yet. The new company will also work towards creating treatments for chronic diseases. New specialized medicines and diverse treatments will be introduced. This combination of companies will be targeting 65 countries in total all over the world.