Ranbaxy forces Orchid into an alliance
22 April 2008
Mumbai: Ranbaxy Laboratories Ltd, the country's largest drug company by sales, has entered into a business alliance with Chennai-based Orchid Chemicals & Pharmaceuticals whereby Orchid would manufacture both finished dosage formulations, and active pharmaceutical ingredients (APIs) for marketing by Ranbaxy.
The two companies said in a regulatory filing with the exchanges that the business alliance involved multiple geographies and therapies for both finished dosage formulations and active pharmaceutical ingredients. Additionally, this agreement would establish a framework for enhanced future co-operation between the two companies.
"Orchid is a niche player in the global pharmaceutical industry with an impressive track record, particularly in sterile products. We are pleased to enter into this long-term strategic alliance with Orchid. The agreement will be mutually beneficial and synergistic, allowing both organisations to leverage each others inherent strengths," Malvinder Mohan Singh, CEO and managing director of Ranbaxy, said.
Orchid is the world's fifth largest maker of the antibiotic cephalosporin.
In the last fortnight Ranbaxy built up a sizable 14.65-per cent stake in Orchid through its subsidiary Solrex, which had emerged a bulk acquirer of Orchid's shares through open market transactions, leading to speculation of a possible hostile takeover of Orchid by Ranbaxy.
Ranbaxy said Solrex, the firm which had acquired the stake in Orchid, is a partnership between its two wholly owned subsidiaries, Solus Pharmaceuticals Ltd and
Rexcel Pharmaceuticals Ltd.
Earlier Ranbaxy had refused to comment on its relationship with Solrex even as the latter continued buying up Orchid shares from the open market.
"We are happy to join hands with Ranbaxy, India's largest pharmaceutical company. Ranbaxy's global scale and market reach and Orchid's state-of-the-art development and manufacturing capabilities would expand the business of both companies,'' a statement quoted K Raghavendra Rao, managing director of Orchid Chemicals, as having said on the developments. ''We believe that this will be a win-win arrangement for both companies."
Rao said the deal is only on the business side and not on the equity side. ''No separate company is to be formed for the alliance,'' he said. Malvinder Mohan Singh too had denied comment on questions whether he intended to increase his stake in Orchid.
Rao insisted that the current agreement is a marketing arrangement specific to certain products, which Orchid will produce, and Ranbaxy will market. However, there won't be any cash infusion by the bigger company to help Orchid reduce its debt.
''We are in no stake sale discussion with Ranbaxy,'' Rao told CNBC TV, adding, ''the stake is not a part of our discussion at all. That is an independent transaction that happened''.
