The shareholders of Sun Pharma and Ranbaxy cheered the long-awaited nod from the Competition Commission of India (CCI) for the latter’s merger with Sun Pharma. While the stock of Sun Pharma gained about 2 per cent, Ranbaxy’s stock gained nearly 4 per cent in trade on Tuesday.
The merger approval is subject to fulfillment of these conditions by the Sun-Ranbaxy combine. After analysing the product portfolio and market position of these two companies across therapeutic segments, CCI, which is the nodal body for cracking down anti-competitive practices, has recommended divesting six of Ranbaxy's brands and one brand owned by Sun Pharma.
The two companies collectively constitute up to 95 per cent of the total market for these seven formulations. For instance, consider the cholesterol lowering drug combination – Rosuvastatin + Ezetimibe. Ranbaxy’s Rosuvas EZ brand is the leader, with over 55-60 per cent of the market. Sun’s Rozavel EZ brand accounts for almost 30-35 per cent of the total market for this combination.
CCI has also recommended stalling of development and commercialisation of Ranbaxy’s two oral anti-diabetic products – Sitagliptin and Sitagliptin + Metformin combination, wherein Sun already has meaningful presence. Sun, which in-licensed these molecules from the innovator – Merck Sharpe and Dohme (MSD) in 2011-12, sells them under the brand name – Istavel and Istamet.
However, the conditions imposed by CCI for the successful completion of the merger, is unlikely to have any material impact on the combined entity’s revenue and profit.
According to an analysis by pharma market research firm AIOCD AWACS, the total sales (for Ranbaxy and Sun) from these seven brands is estimated at Rs 137 crore. Domestic sales of the Sun-Ranbaxy combine for the 12- month period ended October stood at Rs 7,311 crore, according to AIOCD AWACS.
According to a joint press release by Sun and Ranbaxy, the revenue loss for the combined entity on account of this move will be less than a per cent.
Post-merger, Sun Pharma will be India’s largest pharma company with domestic sales in excess of $1 billion and the fifth largest generic speciality company in the world.