Mumbai, June 11: Daiichi Sankyo Co Ltd’s move to buy a controlling stake in Ranbaxy Laboratories could hasten the process of consolidation in the domestic pharmaceutical industry as suitors look at potential targets that offer synergies.
Industry observers do not expect Indian promoters of other pharmaceutical companies to start salivating at the prospect of earning fat premiums on their holdings, but they don’t rule out the possibility of some promoters cashing out.
The global pharmaceutical world has seen some large-scale buyouts in recent years but it will be a while before the trend catches on in India.
There have been a few buyouts in the pharma space in India: generic giant Mylan Laboratories of the US acquired a majority stake in Matrix Laboratories, while the Burman family sold their stake in Dabur Pharma to Fresenius Kabi of Singapore. There also have been instances where a few domestic players have picked up stakes in other bit players.
At the same time, Indian companies have made their mark in overseas territories, particularly in developed markets such as the US where they have aggressively marketed generic drugs. Analysts and industry experts reckon that any decision to sell out will be a company-specific strategy and that the Ranbaxy-Daiichi deal will not act as a catalyst for change.
“Though many Indian companies have made good returns in the generic space, the business is volatile. You may find high sales in two quarters and then a sharp slump. Moreover, in new chemical entities, it is a long wait. In such circumstances, it makes sense to consolidate but few may choose do so,” says an analyst who does not wish to be identified.
Sarabjit Kour Nangra, vice-president of research at Angel Broking, points out that though consolidation in the domestic pharmaceutical industry has been long overdue, the Daiichi-Ranbaxy deal may not lead to consolidation across the sector as it depends on the strategy of each company.
Nangra adds that the strong generic pipeline of Ranbaxy and its presence across many markets are the prime reasons behind its promoters getting a good premium.
