Ranbaxy CEO sees consolidation wave over 3 years
LONDON (Reuters) - A wave of consolidation will hit low-cost Indian drugmakers over the next three years as companies seek global scale to survive, Ranbaxy Laboratories Ltd (RANB.BO) Chief executive Malvinder Singh said on Wednesday.
Ranbaxy's decision this month to accept a takeover offer worth up to $4.6 billion from Japan's Daiichi Sankyo (4568.T) could also make family-held businesses across India rethink the idea of selling to foreigners, he added.
"This might make people revisit their strategies and look at the various options they have to enhance the growth of their organizations," he told Reuters in an interview at the company's London headquarters.
"This (deal) to me is another sign of India's businesses being more integrated globally and recognizing that globalization is a two-way street."
Indian drug makers until recently were on acquisition sprees of their own but are now seen as attractive targets for foreign firms seeking entry to the fast-growing market, their research and development expertise and a low-cost manufacturing base.
Ranbaxy's family-controlled rivals such as Cipla Ltd (CIPL.BO), Dr Reddy's Laboratories Ltd (REDY.BO) and mid-sized
Aurobindo Pharma (ARBN.BO) could be potential targets.
The decision to do a deal now made sense because it allowed Ranbaxy to choose a partner from a position of strength, a luxury others may not have if they fail to move quickly, Singh added.
The consolidation will come from more foreign companies seeking a foothold in a growing market as well as domestic drug makers gobbling up each other to grow big enough to compete, he added.
"In three years you will see a change in the market and the landscape of Indian pharmaceuticals, there will be consolidation," Singh said.
The Indian pharmaceutical market is dominated by small- and medium-sized family-run firms which prefer to function independently, making a mix of generics -- cheaper off-patent drugs -- as well are more common medicines and health products such as aspirins and vitamins.
Convincing those families to sell has been seen as a tall order, which could present many companies with tough choices after Singh's decision to offload his family's 34.8 percent stake in Ranbaxy.
"That is the advantage of being a leader and changing the rules of the game," Singh said. (Others) will have to get forced to follow and then many people will start coming together so those who don't move fast will have fewer choices and might get left behind.
Earlier on Wednesday, Ranbaxy and Pfizer (PFE.N) said they had reached deal to settle patent litgation that allows the Indian drug maker to begin selling a U.S. generic form of its Lipitor cholesterol fighter by late 2011.#
The agreement gives Ranbaxy a 180-day jumpstart in the key U.S. market and bring a degree of certainty to the launch of the medicine, Singh said.
"That is a very substantial event," he said. "That allows us to get the product in, get the business, get the profits.
(Editing by David Cowell)
