Sun doubles in size as it completes Ranbaxy buyout

Sun Pharma Managing Director Dilip Shanghvi

With Sun Pharmaceutical's $4 billion buyout of Ranbaxy Laboratories all but wrapped up, the combined company has plenty on its plate: get plants banned by the FDA in order, get more products approved and to the market and find $250 million in savings with minimal layoffs. But despite those tall orders, Managing Director Dilip Shanghvi said it still has bandwidth and the money needed to make more acquisitions.

"We will continue to focus on gaining trust of the regulators globally while continuing to develop products based on patient needs and leverage them to become brand leaders globally," said Shanghvi, who started the company in 1982 with a few hundred dollars and built it to its current size though more than a dozen M&A deals, in the process making himself into India's richest man with a net worth estimated at more than $23 billion.

With the deal, it seals its place as the fifth largest generic producer in the world, and the U.S., with projected sales of $5.1 billion, behind Teva Pharmaceutical Industries ($TEVA), Sandoz, Actavis ($ACT) and Mylan ($MYL) but ahead of companies like Hospira ($HSP), Fresenius and Sanofi ($SNY). While primarily playing in the generics market, Sun also has some specialty products approved and under development, including a monoclonal antibody undergoing Phase III trials for treating chronic plaque psoriasis that it licensed from Merck ($MRK), as well as an agreement with Intrexon ($XON) to develop gene-based therapies for ocular diseases.

The company will now have 1,800 scientists among its 30,000 employees and will focus on expanding its specialty pharma business and making complex generics, it said. The company said it intends to pick up the pace in R&D with the potential to devote $500 million a year to it.

The "pharma business is linked with the success in R&D," Shanghvi told reporters during a press conference today in Mumbai, LiveMint reports.

In the U.S., where sales of about $2.3 billion will account for half of the merged company's revenues, it will focus on dermatology, oncology, controlled substances and ophthalmology. It claims to be the leading supplier of generic dermatology products in the U.S. and counts itself third in branded products in that category. It has 450 approved products in the market and 149 applications for generic drugs awaiting approval.

But it has already missed its chances with a couple of huge sellers. The FDA pulled Ranbaxy's 180-day exclusives for generics of AstraZeneca's ($AZN) heartburn drug Nexium and Roche's ($RHHBY) antiviral Valcyte because of its manufacturing problems. A court turned down Ranbaxy's appeal, and Shanghvi said today that Sun may drop the legal action and move on.

Those misses also illustrate why Shanghvi has made Sun's first priority to get back into the good graces of the FDA with the four Ranbaxy plants and one Sun plant that the FDA has blocked from shipping to the U.S. over quality and data integrity concerns. Ranbaxy's years of failing to meet FDA standards for testing and producing products was key to why owner Daiichi Sankyo choose to do the all-stock deal with Sun, leaving it as its second largest shareholder. Sun is working with consultants to make improvements in the plants and in the way employees think about quality, the company said, and promises 100% compliance.

While the U.S. is its biggest market, Sun will now have 45 manufacturing plants around the world, and will sell into 150 countries. As with Big Pharma, emerging markets are important, and it will focus on Brazil, Mexico, Russia, Romania and South Africa.

Shanghvi also made clear that M&A is still in the picture. Sun went through more than a dozen deals since 1997 to get to its current size, and he said it has the finances and the will to do more, Shanghvi said in the press conference. In fact, while awaiting closure on Ranbaxy, Sun earlier this month struck a deal to buy GlaxoSmithKline's ($GSK) opiates business in Australia for an undisclosed sum. The acquisition will make Sun one of three companies globally with what it calls a "farm-to-market" opiate business, giving it direct access to poppy crops in Tasmania where most of the raw materials for opiates are produced.

- here's the announcement
- read more from LiveMint
- get more from Reuters