Sun Pharmaceutical/Ranbaxy Laboratories

Sun Pharmaceutical/Ranbaxy Laboratories
Deal value: $4 billion
Deal status: Open

For years, Sun Managing Director Dilip Shanghvi had been looking for a deal that would get his company a bigger piece of the U.S. market, but at a price he felt comfortable paying. With Ranbaxy Laboratories, he got a company with a strong track record of getting first-to-file ANDAs for blockbuster drugs including Pfizer's ($PFE) Lipitor, Novartis' ($NVS) heart drug Diovan and AstraZeneca's ($AZN) heartburn blockbuster Nexium. He got it at a fire-sale price. It was first annonced a $3.2 billion all-stock transaction but Sun now insists it is valued at $4 billion.

Sun Pharma Managing Director Dilip Shanghvi

Sun was able to get such a deal because Ranbaxy has repeatedly stumbled over its good science with an inability to impress the FDA with its manufacturing standards, frustrating its majority owner, Daiichi Sankyo. The Japanese drugmaker bought controlling interest in Ranbaxy in 2008, paying $4.6 billion as way to get into the low-cost generics manufacturing that India offered. But its timing couldn't have been worse. Shortly after, a whistleblower let the FDA in on a litany of issues at Ranbaxy, like faked drug testing data. The disclosures led the FDA to ban two of Ranbaxy's plants and eventually led the drugmaker to pay $500 million in penalties to settle litigation with the DOJ. But Ranbaxy's problems persisted, and the FDA has since banned two more of its 5 FDA-approved plants and canceled its exclusive for Nexium and another drug, all of which has turned the Indian company from a moneymaker to money pit. When the deal closes, potentially in February, Daiichi Sankyo will be Sun's largest shareholder with a 9% stake.

It is not as if Sun won't have to lay out some serious money when the deal closes. Shanghvi has promised that his attention initially will be on getting Ranbaxy's plants focused on cGMP and its issues with the FDA resolved.

For more:
Sun Pharma hopes to turn fortunes of Ranbaxy around with $3.2B buyout
Daiichi Sankyo sells off Ranbaxy's problems to Sun Pharma
Daiichi Sankyo pledges 'drastic measures' to get Ranbaxy in line
Ranbaxy manufacturing drama continues with FDA action on API plant

--Eric Palmer (email | Twitter)

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Sun Pharmaceutical/Ranbaxy Laboratories