Speaking to CNBC-TV18's Latha Venkatesh and Sonia Shenoy on the acquisition, Vikas Dandekar, India Bureau Chief, Pharmasianews.Com, said Sun may review and trim Ranbaxy's portfolio as the combined field force will be a huge one and there could be issues of duplication. So it all depends on how things are going to move from here, he said.
Below is the transcript of Vikas Dandekar's interview to CNBC-TV18's Latha Venkatesh and Sonia Shenoy
Sonia: Sun Pharma and Ranbaxy both are so different in the way they function, what could be the integration problems that they will face?
A: In the domestic market Sun Pharma has been known for their heavy presence in chronic therapies, they have been big in neurology, big in all of these drugs which are of chronic nature and Ranbaxy's negative point has always been the acute therapies. And because most of the acute therapies had actually been clubbed under the drug price control order (DPCO) 2013, they did take a lot of hit. So in one way great fit but then in the way the field forces are run, the way these two organisations are run are very different. Ranbaxy's capabilities in terms of pushing its products may be reviewed again by Sun.
This is all about the India domestic market which Dilip Sanghvi has been traditionally very bullish about.
Latha: How is it different, is it that Ranbaxy is very aggressive and Sun is perhaps more hemmed in by their rules?
A: Ranbaxy is more broadbased in terms of its product offerings and it has got hundreds of products. In contrast Sun Pharma has limited products but those are all star products and that is where they are actually having a big advantage over all the others. In terms of gaining market share also they have been doing so well in the last couple of years.
Latha: So Ranbaxy portfolio will be trimmed you think?
A: There will be definitely a need for a review of all of this. The combined field force again will be a huge one because that is again going to be may be issues of duplication. So it all depends on how things are going to move from here. Sun Pharma gets a big position in over-the-counter (OTC) markets, in acute therapies, in HIV therapies, Sun Pharma has never been there. Sun Pharma was not in biosimilars which Ranbaxy was looking to enter. So those are the areas where a lot of complimentary advantages will come in.
Latha: What about this liability, Sun Pharma says that they will honor the consent decree but they have been indemnified for certain costs and expenses. You think they are completely indemnified from the subpoenas?
A: That probably will be the case because Sun will not enter into a deal with those open liabilities and a couple of things that need to be remembered here the consent decree is already underway which Ranbaxy has always claimed that have been going according to the timelines. On the regulatory front also I can share that five agencies had actually supervised and inspected some of Sun Pharma's plants and they had also given their approvals.
Nexium is something that all the analysts have been waiting for and to the extent that I know they have been actually talking to a large generic company to tie-up for supplies. The deal may be coming through or may take sometime because I am told that there is some pricing negotiation that is again happening because Nexium is such a huge opportunity. Even the company which wants to supply the API will have to look at the way it stands to gain in the whole process. So from here on all the signals were positive and that was more or less the reason why we thought the ramp-up is happening in the last couple of days.
Sonia: Do you see a lot more consolidation in the domestic M&A, it is interesting because after a long time we are seeing a big Indian company buying another Indian company. Do you see a lot more of that happen?
A: There is space actually. This is one market which is absolutely fragmented, companies have been actually dreading to getting into this market and the difference between the first and the second is in decimal points. Right now EBIT is 7 percent and the signals again from the market that we are getting is that the top companies are actually gaining market share from the smaller companies and the consumers are ready to pay a small premium for the brands which are being offered by the larger companies. Sun in clever in terms of getting a deal at a price which is much better than the others. Last month I spoke to Dilip Sanghvi and he had said that there are opportunities in which bad companies can be run and underleveraged assets can be optimally used.
Latha: Good for Sun Pharma?
A: Definitely.
Sun Pharma stock price
On April 07, 2014, at 14:30 hrs Sun Pharmaceutical Industries was quoting at Rs 579.00, up Rs 7.10, or 1.24 percent. The 52-week high of the share was Rs 653.10 and the 52-week low was Rs 423.18.
The company's trailing 12-month (TTM) EPS was at Rs 0.95 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 609.47. The latest book value of the company is Rs 41.64 per share. At current value, the price-to-book value of the company is 13.90.
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