Indian pharmaceutical companies hold considerable advantage over foreign pharmaceutical manufacturers in terms of cost-effectiveness of manufacturing processes as well as research and development. Thus, the Transaction has the potential to give rise to a formidable force in pharmaceutical manufacturing leading to wider presence and broader product portfolio. This M&A Lab analyzes in detail, the legal, regulatory, tax and commercial considerations behind the Transaction.
The Transaction promises to bring some cheer to the Indian pharmaceutical industry. However, post the consummation of the Transaction, Sun Pharma has plans to gradually phase out the fifty-year old Ranbaxy brand, with Ranbaxy drugs sold in the United States being gradually rebranded
…show more content…
Ranbaxy has a significant presence in the Indian market (21 percent sales) and in the US (29 percent sales). Sun Pharma on the other hand, has a strong presence in the US (60 percent of sales) and India (23 percent), while the rest of the world accounts for 17 percent sales of Sun Pharma. Thus, the combined entity will be more diversified with the US, the rest of the world and India contributing 47 percent, 31 percent and 22 percent of sales respectively. In the emerging markets (50 percent of Ranbaxy’s sales), it provides a platform which complements Sun Pharma’s strengths. Through the Transaction, along with the emerging markets, Sun Pharma will also gain entry into Japan, a market with high growth potential and low penetration of generic drugs. Sun Pharma has estimated that it will save ~USD 250 million in the third year of the merger/ amalgamation because of operating synergy. The Transaction will create the No. 1 drug company in India with a market share of approximately 9% and the fifth largest generic drug firm
The case consists of two major pharmaceutical companies that joint to collaborate their research and pharmaceutical technologies to start a joint venture in India. Both have valuable resources that have benefited both companies during the joint venture. Now both are questioning if there is still any value in maintaining the joint venture in India and will be deciding what will be the best route to take. Ranbaxy Laboratories wants to be bought out, but Eli Lilly is worried of the financial implications of such move.
Economic: Globalization of the pharmaceutical industry is an exciting opportunity to have research and development done at cheaper prices in other countries. However, this could be a double edged sword for companies because it is easy for other countries, such as India, to produce generic versions of the drug in bulk.
Those target markets who rely on Johnson & Johnson health and medical needs are mostly patients, doctors, nurses and civilians. Therefore, the company need to sustain their products and services over all these years to ensure that lower income people and underprivileged patients are able to access on their medicines. This however requires the company to balance patient’s access and competitive dynamics in line with their need as the company need to have enough resources to keep on being innovating, creating new and better medicines and at the same time making sure there will be a fair return to the shareholder as well. Johnson & Johnson also work closely with the governments, physicians, non-government organizations and the international donors all around the world to provide its products within an affordable prices to its
Ranbaxy has become international and thus needs to concentrate more on generics and growth in US and UK; the joint venture with Eli Lilly no longer seems to be central to Ranbaxy’s current goals. With major changes in India’s regulation and patent protection, Eli Lilly can now enter the Indian market independently and soon would enjoy product patent protection.
The company is so large that no one drug can lift it from its current sales doldrums. In addition, the company was once highly attractive to investors, but its recent stock price fell to 1997 lows. This may put pressure on the company to attempt acquisitions at a time when the company is ill-equipped to integrate a new company into its organization, and it is engaged in a cost-cutting program at a time when it may need to invest even more in research and development (McTigue Pierce, 2005).
With soaring medication prices, many drug manufactures have the aspiration to increase profits, which have the effect of rising drugs cost and concerning for Americans. Fortunately, both Democrats and Republican have illustrated interest in passing Prescription Drug Affordability Act of 2015. Captivatingly, the act will allow Medicare to consult manufacturers and set affordable prices. Many have also requested to allow of purchasing medication from Canada which currently has lower drug cost. Reports often appear in the popular press about American consumers who go to Canada or Mexico to buy their prescription drugs at a fraction of what they would pay in U.S. pharmacies, even though doing so is illegal (1). By contrast, the United States leads
Selling Eli Lilly’s entire stake within the Joint venture can bring both positive and negative impacts on Eli Lilly. To evaluate this option, the key question lies on whether terminating the Lilly-Ranbaxy relationship and consequent one-off cash flow overweighs the risks of trade secret leakage, potential loss of market share in the indian market in the long run. Selling off the stake in a JV allows Eli Lilly to cut ties associated with Ranbaxy and get a sum of immediate cash. According to exhibit 5, it should be noted that the other expenses for Eli Lilly has been increasing from 157907 to 254822 from 1988 to 2001. Coupled with the instability and lower entry barriers to the market, selling the entire stake in JV could
An explosion of mergers has occurred in the biopharmaceutical businesses. Contrasting to mergers occurring in the early 2000s, the biopharmaceutical businesses combine for R&D purposes. As stated earlier biopharmaceutical have moved to the forefront and has contributed to in access to 76 billion dollars in 2011 (Lang, 2003). As businesses look for advanced marketing and distribution centers they look to merge. A business may decide to merge into different ventures whereas a similar company is primarily already operating rather than start from scratch, and so the company may just merge with the other company to diversify their products and services.
There are advantages of starting a pharmaceutical firm in India. It has emerged from being an enzyme-producing firm to a biotech powerhouse under the guidance of Ms Kiran M. Shaw. They have a well-established pharmaceutical industry that has been growing since 1947. After the purchase of Hindustan Antibiotics Ltd. and India Drug and Pharmaceuticals Ltd. they were able to compete with the MNC’s (Multi National Corporaton) from overseas (Kalegaonkar, Locke, Lehrich, 2008, p. 2). In the beginning the pharmaceutical industry saw substantial growth. “By the beginning of the 21st century, over 20,000 pharmaceutical companies were operating in India” (Kalegaonkar, Locke, Lehrich, 2008, p. 2). “The pharmaceutical industry in India is ranked third
Eli Lilly was approached by a leading pharmaceutical firm in India to consider building a joint venture together. Ranbaxy Laboratories began as a family business in the 1960’s, but with strong entrepreneurial skills the company grew to become one of the largest manufacturers for bulk drugs and generic drugs. The two companies considered pursuing a joint venture that would support on another’s products by supplying one other with ingredients to complete company products without having to trade with other companies internationally. The JV would potentially lead both companies, together to become a dominant force in the Indian market.
We analyzed the Indian Pharmaceutical industry on these five forces and the findings of industry competitiveness and profitability are written under the relevant competitive forces.
Introduction AstraZeneca PLC (AstraZeneca, AZN:NYSE, AZN:LSE) is one of the largest pharmaceutical companies in the world. It was formed in 1999 from the merger of Sweden’s Astra AB and UK’s Zeneca Group plc. Core Activities AstraZeneca is engaged in the discovery, development, manufacturing and marketing of prescription pharmaceuticals and biological products for important areas of healthcare: Cardiovascular, Gastrointestinal, Infection, Neuroscience, Oncology, and Respiratory and Inflammation. One of the key benefits of the merger between Astra and Zeneca is seen as their portfolio of new products in development: AstraZeneca call this their 'product pipeline'.
GSK is the 2nd largest pharmaceutical firm in the world, and the largest in the UK by sales and profits, it is responsible for 7% of the worlds pharmaceutical market, and has its stocks listed both in UK and US (O 'Rourke, 2002). The origin of the so called blockbuster model, is partly linked with Glaxo (as it was previously known). In the early 80’s, then Glaxo brought to light their first blockbuster drug, Zantac, which was an anti-ulcer drug, which was very similar to the a pre existing drug Tagamet (first ever blockbuster) sold by Smith Kline & French, their completion at the time (MONTALBAN and SAKINÇ, 2011). The introduction of this drug, brought about an increasing sales force in the US, the company soon became dependent on the drug, because it represented a large part of their profit. In 2002, 8 blockbusters of GSK contributed to $14.240 million sales revenue, taking up 53% of its total ethical sales (Froud et al 2006). However, due to the nature of the pharmaceutical industry, the patent began to expire, in other to avoid the patent cliff, Glaxo merged with Wellcome in 1995, which ensured a growing number of sales force, and with Beecham in 2000 (Froud et al., 2006) this merger, boosted the confidence of investors, by growing the business inorganically. For Big Pharma, this block buster model is very profitable, because with the high cost of R&D, the drugs are able to generate ample profit, to cover the sunk costs
The research and development of the pharmaceutical industry is very important as the industry relies on it to develop new products to maintain and sustain the growth of the industry (ALRC 2014). According to the Australian Government Law Reform Commission, every year, the total spending in research and development in pharmaceutical industry, which includes drug discovery, pre-clinical testing and clinical trials on drugs is around $300 million (ALRC 2014). Mergers and acquisitions are intensifying in the global pharmaceutical industry, especially over the last 10 years. With factors like exorbitant research and development costs, the relatively shorter product life cycles, and the rarity of discovering a new life-changing drug acting as catalysts, leading pharmaceutical companies now have more cause to step out and look for external collaboration. This results in an increasing number of smaller biotechnology companies merging with bigger pharmaceutical companies (The
This report provides an analytical strategic review of the global pharmaceutical industry; its origin, evolution,