Mumbai: The world’s biggest drugmaker, Pfizer Inc., may face antitrust hurdles in several countries if it decides to counterbid for and take over India’s largest drug company Ranbaxy Laboratories Ltd, according to legal experts and investment advisers.
About 34.8% equity held in Ranbaxy by the company’s promoters is being a acquired by Japan’s third largest drugmaker Daiichi Sankyo Co. Ltd for up to $4.6 billion (Rs19,734 crore). On Monday, the Tokyo firm said its open offer to buy up to 92.5 million Ranbaxy shares, equivalent to 20% equity, would be open 8 to 27 August.
Ranbaxy holds the marketing rights to sell the copycat or generic version of Pfizer’s $13 billion heart disease drug Lipitor in the US, Canada and several European countries after the expiry of the patent between March 2010 andNovember 2011.
Antitrust laws in these countries, which discourage monopolistic or unfair business practices, do not allow patent holders to have marketing rights to the copycat drugs as well. Companies whose decisions are influenced by the inventor are also barred from holding rights to copycat drugs. Generic versions of drugs are approved in in anticipation of a copycat maker launching the product there at a lower price.
“Even if Pfizer is successful in making a counterbid for Ranbaxy, it has to relinquish the generic rights held by Ranbaxy to a third party, because neither Pfizer nor Ranbaxy can launch the cheaper version as it would violate the competition norms,” said a senior executive at an international investment advisory, who preferred anonymity.
Ranbaxy is a key generic player in international markets, and is fighting with Pfizer for rights to sell Lipitor in a dozen other countries.
“There are possibilities of antitrust actions being initiated by countries if the market share of the combined entity leads to monopoly and higher prices even after the expiry of patent protection of important drugs,” said Anoop Narayanan, corporate lawyer and partner in international law firm Majmudar and Co.
However, the pending court cases between Pfizer and Ranbaxy on Lipitor are unlikely to create hurdles for a takeover, he added.
A day after the Daiichi Sankyo-Ranbaxy announcement on Wednesday, financial daily Business Standard later said Pfizer may make a counter offer to Ranbaxy shareholders to acquire control of the company, eyeing its generic business, especially the marketing rights for the copycat version of Lipitor. A counterbid has to be made before 7 July, as Indian takeover regulations mandate such an offer within 21 days of the original public announcement of a takeover. Ranbaxy’s share price on the Bombay Stock Exchange rose 0.15% to Rs567.75 on Monday. The stock price has increased 7.85% since the Daiichi Sankyo deal was announced.
Asked about a possible counter-offer, Pfizer’s vice-president (global media relations) Raymond F. Kerins on Friday declined comment “on such speculations and rumours”. A Ranbaxy spokesperson said “there is no question of (his firm) backing out from the deal”.
According to the generic approval that Ranbaxy has secured in the US, Ranbaxy can launch its version of Lipitor in March 2010. Pfizer had filed two patent infringement cases against Ranbaxy to prevent the Indian firm from doing so or introduce a generic version of another Pfizer drug, Caduet (a combination drug of Lipitor), in the US until 2016.