Sun Pharma’s acquisition of Ranbaxy might have surprised many, but the company is confident of resolving the regulatory issues and leveraging the strengths of the merger. Senior vice-president (accounts and finance) Uday Baldota tells Sushmi Dey. Excerpts:
What does the acquisition of Ranbaxy mean to Sun Pharma? How will Sun’s business strategy shape up after the completion of the deal?
The strategy we pursued will not be altered dramatically. Our primary focus was the US and India. In India, the idea was to continue to gain market share and higher prescription share from doctor classes. I think all of that is enabled from what we are doing now, as part of this deal. So far, we were number one, with prescriptions from seven doctor classes; now, we will be number one in 13 such classes, with Ranbaxy. So, that is a huge benefit. Similarly, in the US, our strategy was to get more products in the market. What Ranbaxy does for us is it gets 150 additional products. The strategy is sound; we need to continue to execute that strategy. The third element of the strategy is emerging markets. We were very small and negligible in the emerging markets world. With this combination, we will touch slightly below $1 billion a year, without counting India here.
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Apart from the product portfolio and emerging markets, Sun Pharma will also acquire a huge manufacturing asset base from Ranbaxy. A large part of this, however, is banned from the US market. How confident is Sun Pharma of restoring supplies from these Ranbaxy factories?
We feel if we work closely with the regulator and understand what it expects in standards, practices, compliances and work hard to meet those, it should be possible. We have seen it is possible in our factories. With our experience, it will be possible to sort the regulatory issues.
Are you likely complete the consent decree by 2017, as provided for?
I think it is difficult to predict that. It is important the compliance in the consent decree is 100 per cent. Ranbaxy, and once the merger happens, the combined company, will work towards ensuring there is 100 per cent compliance of the consent decree. That is the direction.
Though a lot of remediation measures have been undertaken by Daiichi Sankyo, it is understood some of the cost is likely to stick to Sun Pharma after this deal. Are there any estimates?
No, there are no estimates. But the performance of the company (Ranbaxy) in the recent past includes all the cost it is incurring towards remediation and other things.
With the merger of the two companies, some product portfolios will overlap. Is there scope of trimming some Ranbaxy portfolios?
I do not think we are looking at this combination exercise as any kind of trimming exercise, in terms of products, etc. We believe there is tremendous opportunity for us to grow. Working together and with regulators, we should be able to craft a strategy by which the existing infrastructure is leveraged for profitable growth.
What happens to brand Ranbaxy after the merger?
We have not reached there yet, but we need to decide what on the best way of using it. The surviving company will be called Sun Pharmaceuticals, but we have to think how to use the Ranbaxy brand.
What are the plans for restructuring human resources, as functions will overlap? Also, what about the senior management?
We haven’t discussed these yet. There is no hurry to do that because all this will happen after the deal is closed. The business will be so large that we will need people to manage it. Here, the core aspect is profitable growth; we need to ensure the combined business continues to grow rapidly and profitably. To do that, strong resources are required, which will come from both the organisations.
Is there a possibility of some executives from Ranbaxy’s top management coming on the merged entity’s board?
As I said, that is one of the options. What we need to understand is a much larger growth platform is being created. For us to drive growth on this platform, we will need people to contribute. Probably, how we organise and restructure ourselves is very early for us to discuss. Before we finalise anything, it needs a lot of deliberation.
What is the process and timeline for delisting Ranbaxy from Indian bourses?
That is the date of closing, expected by the end of this year. Whenever the closing happens, Ranbaxy will be delisted.
