Sun Pharma Begins Ranbaxy Integration

Sun Pharmaceutical Industries Ltd. has begun the integration of Ranbaxy's business following the successful closure of its merger. In April 2014, Sun Pharma agreed to acquire Ranbaxy for $3.2 billion plus the assumption of $800 million in debt from Daiichi Sankyo, which held a controlling stake in Ranbaxy, which it acquired in 2008/2009. With the closing of the deal, Ranbaxy was merged with Sun Pharma by means of a share swap, resulting in Sun Pharma as the surviving company and Ranbaxy as the company absorbed, and Daiichi Sankyo becoming the second largest shareholder in Sun Pharma.

The merger positions Sun Pharma as the world's fifth largest specialty generic pharmaceutical company and the top ranking Indian pharma company, according to the company, with products sold in more than 150 nations with a stronger presence in the US, India, Asia, Europe, South Africa, CIS & Russia, and Latin America. The pro forma consolidated revenues for the 12 months ending December 2014 were $4.5 billion, of which the US contributed $2.2 billion.

The combined entity's manufacturing footprint covers 45 manufacturing facilities, which includes 11 active pharmaceutical ingredient (API) manufacturing facilities and 34 finished dosage manufacturing facilities across India, the Americas, Asia, Africa, and Europe. Prior to the merger, Sun Pharma had eight API manufacturing facilities (five in India, and one each in Israel, the US, and Hungary, and Ranbaxy three API manufacturing sites in India. On the finished dosage side, 18 facilities are from Sun and 16 from Ranbaxy, which include 13 finished dosage manufacturing sites of the combined entity in India and seven in the US.

One of the issues going forward for the combined company will be manufacturing quality, with both companies recently facing issues. In November 2014, the US Food and Drug Administration (FDA) rescinded Ranbaxy's previously granted tentative approvals for the company’s abbreviated new drug applications (ANDAs) for esomeprazole magnesium delayed-release capsules, 20 mg and 40 mg, and for valganciclovir hydrochloride tablets USP, 450 mg. Esomeprazole magnesium is the generic version of AstraZeneca’s gastrointestinal drug, Nexium, and valganciclovir hydrochloride is the generic version of Roche’s antiviral drug, Valcyte. In a statement, Ranbaxy said that the FDA said its original decisions granting tentative approvals were in error because of the compliance status of the facilities referenced in the ANDAs at the time the tentative approvals were granted. As a consequence, in FDA's view, Ranbaxy forfeited its eligibility for 180-day exclusivity for its ANDA for valganciclovir hydrochloride tablets USP, 450 mg. Ranbaxy has had quality control issues at its manufacturing facilities, which included an FDA import alert issued in 2014 for APIs manufactured at Ranbaxy’s facility in Toansa, India.

In May 2014, the FDA issued a Warning Letter to Sun Pharmaceutical Industries for data-integrity issues and related cGMP violations at the company’s API and finished product manufacturing operations at the company’s facility in Vadodara, Gujarat, India. FDA issued the letter in response to an inspection of the pharmaceutical manufacturing facility made on November 13 to November 16, 2013. Also, in 2014,, Sun Pharmaceutical Industries Ltd announced that, as a part of its manufacturing consolidation in the US, it will cease manufacturing operations and close the Detroit facility of Caraco Pharmaceutical Laboratories, a subsidiary of Sun Pharma USA, the US arm of the Mumbai-based Sun Pharmaceutical Industries. Ltd.. In 2014, Caraco issued a voluntary recall of select bottles of metformin. In 2009, US marshals, at the request of FDA, seized drug products and ingredients manufactured by Caraco at the Detroit facilities as well as two other facilities in Michigan at Farmington Hills and Wixom. The action followed Caraco's failure to cGMP requirements and the issuance of several voluntary recalls. Caraco corrected the violations and resumed operations in 2012 at the Detroit facility.

Addressing manufacturing compliance is a stated goal of Sun Pharma as part of its integration process of the two companies. Leading the integration process will be Sun Pharma's Leadership Team comprising members from Sun Pharma and Ranbaxy. Over the last 10 months, Sun Pharma and Ranbaxy's joint functional teams put together the integration blueprint with direction from Integration Management Office (IMO). The IMO will continue to oversee the implementation of the functional integration process. The integration will emphasize on productivity enhancement, aligning best functional requirements and employee talents in the combined entity, which has 30,000 employees. It has formalized an operational blueprint for realizing its $250 million synergy target for year-three through value creation across functions. The integration will cover all functions and markets globally. Additionally, remediation at manufacturing units that are currently in deviation from cGMP norms will remain a critical focus. Sun Pharma said it is working with global consultants assisting its internal teams to achieve compliance objectives. The company has identified three key priority levers to drive growth in the combined entity: (1) achieve 100% compliance in manufacturing in line with regulator expectations; increase R&D productivity to introduce new innovative products; and achieve strong business growth across US, India, and the rest of the world.

Source: Sun Pharmaceutical Industries

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