With Ranbaxy dropping out of the race for generics major Merck KGaA, its shareholders may be a tad relieved. Coupled with other recent problems that the firm was facing, its bid for a deal valued at $5-6 billion had dented its stock in an already choppy market.
Ranbaxy has been spreading itself thin in its recent inorganic growth spree. Recent acquisitions included Romanian firm Terapia at a price analysts termed expensive. A legal suit from Pfizer and the raid on its US offices by the USFDA didn’t help either. Malvinder Singh, its chief executive, recently spoke of being practical about the bid. The dropping out indicates just that, but it’s not just the pricing issue as some analysts may suggest. Rather a case of biting more than what it could chew. In fact, along with other Indian firms, it faces rising risks in the US market.
A proposed law there could stymie their “authorized generics” strategy. Clearly, any further bids would call for more such pragmatism.