Sun Pharma hopes to turn around Ranbaxy in four years of closing deal

Sun Pharmaceutical Industries is learnt to have chalked out a detailed turnaround plan for Ranbaxy Laboratories, its new purchase, even as a merger of the country's top two pharmaceutical companies is awaiting approval of the anti-trust regulator.

According to sources, Sun Pharma has prepared a three-pronged strategy, which includes integration of supply chain and field force for enhanced efficiency and productivity, resolution of regulatory issues and higher growth through synergy in domestic and emerging markets.

Sources say the company has set a three-to-four-year period after the closure of the transaction to achieve full turnaround of Ranbaxy. Sun Pharma expects to close the deal by December.

As a first step, Sun Pharma is expected to streamline and rationalise the functioning of two companies. While the basic structure and functions could be managed in the first year itself, the turnaround of the merged entity will take at least two to three years, say analysts.

The merger move of the two pharma heavyweights, Sun Pharmaceutical Industries and Ranbaxy Laboratories, has created a stir in the pharmaceutical world. Sun's $3.2-billion all-share acquisition of Ranbaxy will not only create India's largest pharmaceutical company but also a significant global supplier of generic medicine.

The Competition Commission of India (CCI) said on Thursday that it had made an initial observation that Sun Pharmaceutical Industries' agreed $3.2 billion acquisition of Ranbaxy Laboratories could hurt competition and has asked the companies to provide more details.

The deal is also closely watched by international regulators and MNC pharma companies.

Turning around Ranbaxy, which has been in losses for several quarters now, and four of its plants still barred from selling in the United States, its biggest market, will, however, be an arduous task for Sun.

Ranbaxy last year admitted that it had falsified data while seeking approval of the United States Food & Drug Administration (FDA), for its generic medicines, and paid a penalty of $500 million to settle the dispute.

The company reported a consolidated net loss of Rs186 crore for the quarter ended 30 June, compared to Rs524 crore in the year-ago quarter.

Ranbaxy, however, has significant value as a drug maker, especially in generic drugs production. Apart from Sun Pharma, private equity funds and multinationals are also eyeing Ranbaxy. Obviously, Ranbaxy makes business sense.

Sun Pharma, which agreed to buy Ranbaxy from Japan's Daiichi Sankyo in April, had previously said it expected to complete the deal by December.