The DNA of Ranbaxy lives on... We have a perfect fit

Written by Pallavi Ail | Updated: Apr 10 2014, 07:09am hrs
Israel MakovTeva?s major challenges were globalisation and profitable growth.
Israel Makovs tenure as chairman of Sun Pharmaceutical Industries has seen three acquisitions URL Pharma, Dusa Pharmaceutical and now Ranbaxy Laboratories and a joint venture to develop therapies for ocular diseases with US-based Intrexon. A jovial person who calls his journey with Sun thrilling and exciting, Makov is looking forward to more excitement. In an interview with Pallavi Ail, Makov discussed the genesis of the Ranbaxy deal and strategies for growth. Edited excerpts:

You were with Teva for about 17 years. How was it being with a world leader

Tevas major challenges were globalisation and profitable growth. M&As came out of it. The challenges here are the same globalisation and continue profitable growth.

Why Ranbaxy

We had identified Ranbaxy. Normally, we wait for an opportunity for something like this, but Ranbaxy was not on the block. We initiated a call to Daiichi Sankyo and once they decided they were going to entertain our request, we moved in a friendly manner and in a very short time.

Now, why we identified Ranbaxy thats easy. First, it brought us better global reach in emerging markets and gave us the leading position in India. Instead of being No.1 in seven therapeutic categories, we are now going to be No.1 in 13. We are also getting additional product lines like antibiotics and over-the-counter medicines. We never made antibiotics; we bought them. The acquisition has also enhanced our position in the US. So, what we have is compatibility in terms of geography and product lines.

Secondly, we saw a lot of value in Ranbaxy. It used to be a very, very good company in the past. We believe the DNA of Ranbaxy is still there. Although the company is in a distressed situation, we think we will be able to help it get over these hurdles. So, its a perfect fit.

Ranbaxy offers you access to emerging markets and Western Europe. How important are these markets to Sun Pharma

They are important because we want to expand our global reach. If you want to achieve profitable growth, you have to derive it from the growth of markets. Emerging markets are fast-growing markets for pharmaceutical companies. We are going to set a fantastic pace with the acquisition of Ranbaxy. In Europe, we have a small base. We want to expand it and the acquisition will help. The reason to acquire Ranbaxy was not Europe, but we get the fringe benefit of having an additional presence in Europe.

The acquisition has narrowed the gap between Sun and Mylan but there is still a considerable gap between Sun and Teva. A reason may be that both of them have innovative products. How does Sun plan to innovate

First of all, we have a sister firm which is an innovator...

Yes, you have SPARC. But, they are developing products under the 505(b) (2) platform.

Doesn't matter, it's still an innovator. I don't think innovation strengthened the generic business of Teva or Mylan. So, we don't need it for the generic business. But we are going to innovate drugs. For example, we acquired Dusa. We are going to broaden our specialty products line. Innovation is a broad term there is innovation, there is breakthrough innovation and we are also going to enter into innovation but we are not going to be a Pfizer or Merck of the world. We are going to do it our own style.

How will Sun deal with Ranbaxy's issues with good manufacturing practices in the US Will you talk to the US FDA

First of all, until the end of this year when the deal closes, Ranbaxy is Ranbaxy and Sun is Sun: We cannot intervene. But we will try to help as far as we can help. And once we take over, of course, we will help even more through our knowledge and our capabilities to help to get over this situation.

Any plans to trim loss-making businesses or cut headcount

You won't see any mass reductions in Sun because we believe in nourishing assets and increasing productivity not by reducing people but increasing their productivity by guiding, training, providing better management systems, making everyone accountable for what they do and being able to make decisions.

And to do that, you share the best practices between the two companies. These things can create a huge increase in productivity and this is what we expect.

How does the deal benefit Sun Pharma in the Indian market

If you really reached a situation where you need certain therapeutic categories it will put more responsibility on Sun to bring more products to the market and to serve the market. As a leader, we have to serve.

Analysts emphasise on the necessity of inorganic growth in the current market. What is your take on that Would you agree with that viewpoint

The problem is that in all industries where you have increased competition, you have consolidation and consolidation means you have mergers and acquisitions. I think the true scene is that it's a combination of organic growth and merger and acquisition. I want to make a differentiation. There are people who grow only by acquiring companies. What we do and we intend to do is to acquire companies and make them grow organically that's a big difference.

What are your plans for the next generation of products biosimilars and inhalers

First of all, we don't limit ourselves from entering new areas. It very much depends on the situation there are things we can develop in-house, there are things we have to acquire, there are things for which we enter into joint ventures it depends on the product.

How long was the deal in the pipeline

The only thing I can tell you that it was short, in terms of being very intensive people worked day and night. But they were friendly negotiations not hostile. Hostile negotiations always take a long time and everybody is arguing about every point, whether they need to argue or not. Here, we listened to each other, we understood what the other one wants to achieve and why it wants to achieve it and I feel the result is there to be seen.

Sun has shown a penchant for distressed assets. Is that going to be the strategy even in the future, looking for companies with potential but not living up to it

We have done it so far. I can't assure you we are going to do it in the future. First, we have to focus on Ranbaxy. Once we have a bigger Sun, we will have other opportunities. There is a case that we will buy a very successful company and there is a case that we will buy a company in distress, but this is not a strategy.