After a year long engagement, Sun Pharma finally weds Ranbaxy. And as in any marriage, the hard work starts once the honeymoon ends. And getting to the root of Ranbaxy’s non-compliance record will be a major hassle, particularly since Sun Pharma too has faced US FDA’s ire in the recent past. Sun Pharma founder Dilip Shanghvi has admitted that “winning the confidence of regulators” will be key to the merged entity’s future. It took top priority in his vision statement at the close of the FICCI Pharma Summit on March 23 as well as two days later at a major media meet to announce the blue print for the coming months.
Shanghvi’s determination to “work towards overcoming the perception of quality of products made in India” is driven by the fact that the lowest denominator, the smallest company erring on this count is colouring the perception of the entire industry. Clearly, as the biggest pharma company in India, Sun Pharma cannot afford to be seen as anything other than law abiding.
But while it seems committed to doing “whatever it takes” to win back the confidence of regulators, Sun Pharma now has to monitor 45 manufacturing facilities across the globe, with less than half in India. Given that changing the mindset of the workforce in India will take time, as will revamping manufacturing facilities to incorporate the latest GMP-compliant technologies, will it find it easier to simply switch production to its 24 overseas facilities? Or look for more acquisition targets overseas, which come with their own manufacturing facilities so that each geography can be serviced by local hubs? Shanghvi has already said that if the opportunity is right, the balance sheet allows them to pursue targets in the $100 million range, even while they ‘digest’ Ranbaxy.
The fact that Sun Pharma’s overseas facilities even today outnumber its domestic sites is a telling fact. Are Indian companies going to remain Indian in name only? Speakers at the FICCI Pharma Summit cautioned government representatives at the event that it is easier to set up operations overseas. Many managements have already frozen fresh investments in India and are looking at more welcoming destinations like Abu Dhabi’s Khalifa Industrial Zone Abu Dhabi (Kizad), where it reportedly takes just two phone calls to set up a company.
Of course, it is understandable that Indian pharma companies have a ‘dil maange more’ attitude. The domestic opportunity just cannot match up to the global market. So when Shanghvi says that the the objective of the merger was “to emerge as India’s first truly global pharma company, one which the country can be proud of”, he is pressing all the right buttons. But he too tempers this, saying he wants it to be a “better, not just bigger” company.
Success therefore hinges on the company getting its GMP right and surviving the glare of regulatory scrutiny. Shanghvi and team have turned around distressed assets before, and this time his son Aalok too is in the fray. It will be a rough but interesting ride.