|Sun Pharma's Managing Director, Dilip Shanghvi|
The owner and top executive of India's Sun Pharmaceutical Industries has pledged that the first thing he will do when his deal to buy Ranbaxy Laboratories closes is make the needed investments in Ranbaxy's manufacturing plants to bring them in line with the FDA's expectations. But those improvements will have to wait awhile yet.
When the deal, now valued at about $4 billion, was announced in April, the companies said they expected it to close by the end of the year. But Sun Managing Director Dilip Shanghvi told analysts in an earnings call today that he expects "minor delays," Reuters reports. The melding of India's two largest drug manufacturers is still awaiting approval by authorities in both India and the U.S.
The disclosure came as Shanghvi discussed Sun's last-quarter finances. It reported net income of 15.72 billion rupees ($255.4 million), up from 13.62 billion rupees for the quarter ended Sept. 30. That was a 15% boost but missed analysts expectations slightly, Reuters said.
The deal to buy Ranbaxy is actually a deal with Japan's Daiichi Sankyo, which owns about 65% of the Indian generics maker. It is an all-stock deal and when completed, Daiichi will hold about a 9% stake in Sun. Daiichi bought controlling interest in Ranbaxy in 2008 for $4.6 billion, just ahead of the discovery by the FDA that Ranbaxy had been faking test data and selling subpar drugs in the U.S., its largest market. That set off a series of FDA inspections and actions, including the banning of two of its Indian plants, a consent decree and a $500 million payment by Ranbaxy to settle charges in the U.S.
While Ranbaxy initially made some improvements that allowed it to get a generic of Pfizer's ($PFE) blockbuster Lipitor to market, further stumbles resulted in two more of its plants being banned by the FDA in the last 14 months and undercut its earnings potential, as it has lost its ability to bring some first-to-file products to market. That led Daiichi Sankyo to finally give up on turning the company around and decide to sell. Ranbaxy had a much-improved second quarter, having been able to move production of generic Diovan from a banned plant in India to its plant in New Jersey. That progress may be short-lived, however, as the FDA has since yanked approvals for its generics of two other big products, AstraZeneca's ($AZN) Nexium and Roche's ($RHHBY) Valcyte, because of its plant problems in India.