Daiichi Sankyo cashing out after merging Ranbaxy with Sun

Daiichi Sankyo has had enough of trying to make money in the Indian generic drug industry. The Japanese drugmaker, which faces patent cliff issues, is selling off its stake in Sun Pharmaceutical just weeks after it closed on the all-stock deal selling Ranbaxy Laboratories to Sun for $3.2 billion.

With the sale of Ranbaxy, one of the 10 largest M&A deals struck last year, Daiichi became Sun's largest shareholder with a 9% stake. But not for long. In an exchange filing today, Reuters reports, Daiichi Sankyo said its board had given it the OK to sell all or part of that position in what is now India's largest drugmaker, a stake the news services estimates might fetch $3.6 billion. Sun's shares surged today on reports by sources that Sun might buy the shares, the Economic Times reports.

The filing didn't say why Daiichi was cashing out so quickly but the company's experience as owner of a Indian company has been anything but fruitful. Daiichi paid $4.6 billion for controlling interest in Ranbaxy in 2008 as a generics play. What it got instead was non-stop regulatory issues with the FDA, which started shortly after Daiichi struck its deal, and which continue to this day. Four of Ranbaxy's plants are currently banned from selling into the U.S. because of the FDA's concerns about their drug testing authenticity and manufacturing standards. The problems led Daiichi and Ranbaxy in 2013 to pay $500 million to settle litigation with the U.S. Justice Department.

Daiichi has other worries to focus on. The company just announced plans whack 16% of the employees for its U.S. operations, based in Parsippany, NJ. as it faces patent losses. Its exclusivity on the cholesterol drug Welchol is gone in June and then next year things get worse. That's when it loses exclusivity on blood pressure drug Benicar, a drug that accounts for 27% of its revenues, about $2.6 billion a year.

Sun managing director Dilip Shanghvi

Sun's founder and managing director Dilip Shanghvi has pledged that his first priority is to get Ranbaxy regulatory issues resolved but it is anyone's guess how quickly that can be achieved. If Shanghvi can get the merged companies into shape in a timely fashion, he will be in control of a major force in the industry. It will be the fifth largest generic producer in the world, and the U.S., with projected sales of $5.1 billion. In the U.S., where it expects to get nearly half of its revenues, the company is focused on dermatology, oncology, controlled substances and ophthalmology.

- read the Reuters story
- more from the Economic Times

Special Report: Pharma's top 10 M&A deals of 2014 - Sun Pharmaceutical/Ranbaxy Laboratories

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