Ranbaxy targets M&A for drugs growth
Ranbaxy Laboratories Ltd is actively pursuing a handful of acquisition opportunities in the United States and elsewhere to boost its generics drugs business, its new CEO said on Wednesday.
Malvinder Singh, who took over the job at India's leading drugmaker last week, said he hoped a deal might be clinched in 2006, adding the U.S. market was a key priority.
"We are actively looking at some targets today. My intent would be to look at concluding something (this year), but it must be a strategic fit that adds value," he told Reuters on the sidelines of the World Economic Forum annual meeting in Davos.
"Clearly, in America we need to gain critical size," the chief executive added.
"Our U.S. business today is around $350 million (a year). I think it is quite feasible to look at the same size through acquisition." Ranbaxy, which had worldwide sales of $1.2 billion in 2005, has ambitions to reach $2 billion in 2007 and then $5 billion by 2012 to become one of the world's top five generic drug companies.
The generic drugs industry has seen a wave of consolidation recently, spearheaded by market leaders Teva Pharmaceutical Industries Ltd and Sandoz, the generics arm of Novartis AG.
Singh noted that generic drugs businesses had sold in the past year for between one and five times their annual sales.
Around the world, cheap generic medicines are in a sweet spot as governments promote their use to cut costs and as more branded blockbuster drugs lose patent protection.
But competition is fierce, leading to pressure on prices and encouraging companies to seek greater economies of scale.
That took a heavy toll on Ranbaxy in 2005, when profits fell 63 per cent and its shares lost 42 per cent due to falling prices in the United States, patent battle setbacks and high legal and research costs.
January 25, 2006