Ranbaxy & Daiichi Sankyo Co. Ltd.

- Merger
An Intellectual Property and Business Perspective

Scope e-Knowledge Center Pvt. Ltd.

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October 2008

Table of Contents
1.0

BACKGROUND...................................................................................................................................................1

2.0

STRATEGIC RATIONALE ..................................................................................................................................2

3.0

COMPETITIVE STRENGTHS AND PAIN POINTS.............................................................................................6

4.0

R&D FOCUS AND PATENT PORTFOLIOS-A COMPARISON..........................................................................10

IA.

PATENTS SPLIT-UP ACROSS PLAYERS.........................................................................................................13

IB.

PATENTS SPLIT-UP ACROSS APPLICATION YEARS....................................................................................13

II.

PATENTING FREQUENCY ANALYSIS..............................................................................................................14

III.

IPC ANALYSIS....................................................................................................................................................15

IV.

IPC GAP ANALYSIS ...........................................................................................................................................17

V.

IPC SHIFT............................................................................................................................................................19

VI.

DIRECT CITATION ANALYSIS...........................................................................................................................22

VII.

THERAPEUTIC INDICATIONS ...........................................................................................................................23

VIII.

ABBREVIATED NEW DRUG APPLICATION (ANDA) .......................................................................................26

IX.

NEW DRUG APPLICATION (NDA) & BIOLOGIC LICENSE APPLICATION (BLA)..........................................28

5.0

PERSPECTIVES..................................................................................................................................................29

6.0

CONCLUSION.....................................................................................................................................................32

1.0

Background
On 11 June 2008, Daiichi Sankyo Co. Ltd., the second largest pharmaceutical company in Japan,
signed an agreement to acquire the entire shareholding of the promoters (the Singh family) of
Ranbaxy Laboratories Ltd, the largest pharmaceuticals company in India. The total stake
amounted to 34.8% and Daiichi Sankyo expects to acquire another 9.4% through a preferential
allotment. The company has the option to acquire up to 20% of Ranbaxys voting capital through
a public offer. Through this offer, Daiichi Sankyo seeks to acquire sufficient number of
outstanding shares to obtain a majority stake in Ranbaxy, that is, a minimum of 50.1%. If Daiichi
Sankyo fails to meet with adequate shareholder response during the open offer, it has the option
to exercise a preferential issue of warrants that can increase Daiichi Sankyos stake in Ranbaxy
by another 4.9%.

The value of the transaction is expected to range from $3.4 billion to $4.6 billion at the rate of
$17.14 per share (INR737 per share, exchange rate: 1USD=43INR), representing a premium of
53.5% to the average daily closing price of Ranbaxys shares traded on the National Stock
Exchange for the three-month period ended 10 June 2008, and 31.4% premium to the last traded
price (price on 10 June 2008). Both the company boards have approved the merger and
subsequent to the closure, which is expected by March 2009, Ranbaxy is expected to be valued
at $8.5 billion and the combined entity at roughly $30 billion.

Ranbaxy will function as Daiichi Sankyos subsidiary but will retain its independent management
and continue to be led by its current CEO & Managing Director Malvinder Singh. Daiichi Sankyo
expects the merger to positively impact its EPS (after goodwill amortization) in the fiscal year
ending 31 March 2010 (fiscal 2010). Daiichi Sankyo will benefit from Ranbaxys low-cost
manufacturing infrastructure and supply chain strengths while this deal will award Ranbaxy with
access to the research and development expertise of Daiichi Sankyo to further its own growing
branded drugs business. Daiichi Sankyo is already the result of the combination of Daiichi
Pharmaceutical and Sankyo Company, a merger initiated in October 2005 and completed in April
2007.

The present study discusses the implications of the merger between Ranbaxy and Daiichi
Sankyo, from an intellectual property as well as a market point of view. This analysis is
particularly important at this point because of a variety of reasons including the growing
preference for generics, increasing dominance of emerging markets such as India, fast
approaching patent expiry etc. Also, given the fact that this involves 2 players who are among the
largest in their respective markets, the deal is of great significance.

Page #1

2.0

Strategic Rationale
Daiichi Sankyo: A boost for mid-term management plan
Both Daiichi Sankyo and Ranbaxy expect the transaction to create substantial synergies in the
long term. The companies benefit from their strikingly complementary businesses, which they
believe would bring considerable cost savings in their diversification initiatives, which will be
aimed at establishing a strong presence in all pharmaceutical therapeutic areas. For instance,
Daiichi Sankyos strength in proprietary medicine is believed to be complemented by Ranbaxys
leadership in the generics segment, thus providing the combined business with a broader product
base, therapeutic focus areas and well distributed risks. Additionally, both companies have a wide
global reach, which is expected to further expand after the merger. Ranbaxys addition can boost
Daiichi Sankyos position from #22 to #15 by market capitalization in the global pharmaceutical
market. Daiichi Sankyo sees this step as critical to the achievement of its objectives outlined in its
Mid-term Management Plan.
As part of the plan, Daiichi Sankyo envisages to become a major global innovator by 2015, at the
back of the growth of its Olmesartan drug during the period 2007-2009. The company also plans
to expand its Levoflaxin product to export markets. Realization of synergies from the complete
integration of Daiichi and Sankyo (2005) is also a major goal of the management plan. Many new
products including the successor of its Venofer drug is expected to propel growth.

Daiichi Sankyo has targeted $13.1 billion (JPY1.5 trillion, 1USD=114.2JPY) in sales by 2015 and
to increase its operating profit margin by at least 25% and overseas sales ratio by at least 60%.
Strengthening its ability to discover new drugs and bolstering its R&D pipeline also feature as
objectives in Daiichi Sankyos Mid-term Management Plan. The sales target for fiscal 2010 is $7.5
billion (JPY860 billion, exchange rate: 1USD=114.2JPY) and an operating profit of $2.10 billion
(JPY240 billion, exchange rate: 1USD=114.2JPY), of which 25% of its expected sales is in local
currency. Daiichi Sankyo expects that its return on equity will increase from 6% to 10% in fiscal
2010 as a result of the merger.

Page #2

Ranbaxy: Debt-free and a stronger balance sheet

Ranbaxy envisages a broader product portfolio for itself as a result of the merger. The company
can also double up as a manufacturing base for Daiichi Sankyos branded drug portfolio.
Furthermore, the company will be free of existing debt as Daiichi Sankyo will be pooling financial
resources towards re-financing its entire debt. Subsequently, Ranbaxy expects to have
approximately $700 million (INR3000 crores, exchange rate: 1USD=42.8INR) as cash surplus,
which increases its book value per share from $1.7 to $4.7. Ranbaxy believes that a stronger
balance sheet will allow the company more flexibility to pursue organic as well as inorganic
growth opportunities to enhance its branded drugs business and move up the pharmaceutical
value chain.
As regards markets, the biggest gain for Ranbaxy is its smoother access to the Japanese market,
being part of Daiichi Sankyo. This will allow Ranbaxy to circumvent other US and European
players (who are currently facing difficulties with greenfield ventures due to stringent testing and
safety requirements) and establish its stronghold in the Japanese drug market. Daiichi Sankyo
foresees better acceptance for the generic versions of its off-patent drugs from Ranbaxy as there
would be better possibilities for an innovative pharmaceutical company to successfully promote
generic versions and reduced resistance from health insurers towards covering generics.
Ranbaxy also sees opportunities to strengthen its API business by working with Daiichi Sankyo
as a supply partner and thereby, optimize its SEZ infrastructure that it is developing. Enhancing
the scale of its biosimilars business in the global market is also an important milestone for
Ranbaxy from the merger. Equally important for Ranbaxy is to become the largest player in
Japans generic drugs market, for which the company is eyeing organic and inorganic routes.
The Daiichi Sankyo Ranbaxy Fit
Daiichi Sankyo

Developed countries
(Current market size:
large)
Low
Growth rate

Emerging countries
(Current market size:
small)
High
Growth rate
Source: Daiichi Sankyo

Page #3

Ranbaxy

Daiichi Sankyos core business

Features: Blockbuster model,
high profitability, slowing growth
rate
Opportunities: Antibody drugs,
personalized medicine

Ranbaxys core business

Features: Low price, high
growth rate
Opportunities: Patent expiry of
blockbusters,
pharmacoeconomics,
biosimilars

Features: High growth rate

Opportunities: Enhancement of
IP protection, economic growth,
population increase

Features: Low price, high

growth rate, large volume
Opportunities: Economic
growth, population increase

Proprietary drugs

Non-Proprietary drugs

The generics cushion for market exposure risks

Daiichi Sankyos unimpressive growth rate in developed markets due to saturation and the risk of
blockbuster drugs losing patent in the future can be combated by the generic manufacturing
capabilities of Ranbaxy. For example, Venofer is approaching patent expiration in the US market
and Floxin Otic has already lost patent protection. Being a proprietary drugs manufacturer, Daiichi
Sankyo was able to generate huge profits from blockbuster drugs before it began experiencing
stagnation as the branded drugs market approached maturity. However, Ranbaxy has high
growth potential in these developed markets for non-proprietary drugs in light of the impact of
pharmacoeconomics. Patent expiration (drugs with about $20 billion in annual sales are expected
to face patent expiry in 2008) has caused major companies like Daiichi Sankyo to evaluate the
costs and benefits of their drugs and synthesize more economical manufacturing methods that
can bring the same drugs to their customers at cheaper prices. Ranbaxys established generics
research framework will help Daiichi Sankyo realize this task and consolidate its position in
developed markets despite the threat of patent expiration. Daiichi Sankyo itself has suffered 10%
price cuts in fiscal 2007 due to the National Health Insurance (NHI) plan and many of its major
products in the domestic market did not achieve their sales targets. With more price cuts
expected in 2008, the acquisition will also provide Daiichi Sankyo with a strong, complementary
presence in the non-proprietary drug market as Ranbaxys generics business will balance its
exposure to market stagnation and margin risks. For example, in Japan where Daiichi Sankyo
has its largest branded pharmaceutical business, Ranbaxy is expected to further its nonproprietary drugs business.
Pharmerging - emerging markets are Daiichi Sankyos future growth engines

Daiichi Sankyo also sees immense potential for growth in emerging markets, particularly Brazil,
Russia, India, China (BRIC), Mexico and Turkey (M&T), which is expected to reach $330-$430
billion by 2030. Moreover, in 2008, generic drug manufacturers and biopharmaceutical
companies are expected to aggressively adapt to these changes and capitalize on the new
opportunities that the shift will present. Thus, the most important benefit for Daiichi Sankyo will be
the access that it will gain to Ranbaxys presence in 21 emerging markets, out of the total of 40
locations where it is operating. This will expand Daiichi Sankyos global reach to 56 countries,
substantially covering major emerging markets and giving Daiichi Sankyo the opportunity to
improve its market share from the current 10% in the BRIC-M&T markets. The combined
business will have a significant position in India, Eastern Europe and Asia and one of the largest
presence in Africa.

Page #4

As regards its own proprietary drugs business, Daiichi Sankyo seeks to leverage the improved
intellectual property protection available in emerging markets and launch proprietary drugs in the
future. Ranbaxys emerging market reach combined with its focus on new drug areas such as
anti-malaria is expected to complement Daiichi Sankyos efforts. Daiichi Sankyo also expects to
leverage Ranbaxys affiliate company Zenotechs expertise in the areas of biologics, oncology
and specialty injectables. Ranbaxy seeks to exploit Daiichi Sankyos innovation platform to further
its nascent innovative drug development segment and gain access to Daiichi Sankyos mature
markets that it does not already serve.
Value chain efficiency for boosting innovative pharma

Competition in the global pharmaceutical market has led companies to rationalize their value
chains and establish efficient operations. Indian companies operating in the global industry are
characterized by their high quality and cost competitiveness combination. Through the merger,
both Daiichi Sankyo and Ranbaxy seek to optimize their manufacturing, sales and R&D assets
mainly in India and become leaner and more agile players. A balance of Ranbaxys autonomy
and the cooperation between the two companies is what Daiichi Sankyo believes will optimize
growth avenues of both players. To begin with, Daiichi Sankyo seeks to exploit Ranbaxys entire
value chain from upstream research and development to downstream marketing and sales. The
research capabilities of Ranbaxy that Daiichi Sankyo can leverage include compound synthesis,
contract research, contract manufacturing (active pharmaceutical ingredients (APIs) and clinical
trial drugs), and clinical trials and data management.

Page #5

3.0

Competitive Strengths and Pain Points

Ranbaxy

Largest pharmaceutical company in India

Localized operations in 49 countries; sales in 125 countries

Sales CAGR of 16.2% in 2002-2007 based on dollar sales

Balanced geographic sales distribution

Strong expertise in intellectual property and global regulatory affairs

180-day marketing exclusivity for four drugs with an annual sales potential of $8
billion

First to file status for 18 drugs with annual sales potential of $27 billion

98 ANDA filings pending approval

Focus on innovative research in anti-infectives, anti-malaria, metabolic disorders, respiratory

diseases and urology

Strong alliances with major global proprietary drugs manufacturers (such as the ongoing drug
development collaboration with GlaxoSmithKline, which was expanded in 2007; and the joint
research partnership with Merck in the anti-infectives segment; the co-marketing agreement
with Ferring International for its endocrine drug; marketing agreement with Natco Pharma in
Yemen; alliances with Krebs and Jupiter for fermentation-based products and peptides
respectively)

Affiliate Zenotechs experience in biologicals

Strong marketing expertise in one of the most competitive markets viz. India

Manufacturing efficiencies labor, infrastructure, quality

R&D expertise scientists, strong generics business, developing innovative drugs business,
expertise in process chemistry
Consolidated annual sales (CY2002 CY2007)

Yr2002

Page #6

Yr2003

Yr2004

Yr2005

Yr2006

1624

1343

1179

1158

957

748

Figures in $ Million
Growth Rate: 16.2%

Yr2007

Sales by region (2007)

12%

6%

28%

5%
Asia
26%

Europe
23%

NorthAmerica
API
Otherregion
CIS**

Source: Ranbaxy
***CIS: Commonwealth of Independent States (Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova,
Russia, Tajikistan, Ukraine, Uzbekistan)

Daiichi Sankyo

Strong presence in the Japanese prescription drugs market

Growth driver potential in blockbuster Olmesartan (anti-hypertensive), Loxonin (antiinflammatory) and Levoflaxacin (anti-bacterial) drugs

Research collaborations with global pharmaceutical majors, such as the collaboration with Eli
Lilly for developing the high-potential Prasugrel anti-platelet agent for the treatment of acute
coronary syndrome due for launch in fiscal 2008

Page #7

Highly integrated supply chain network

Sales force comprising 850 medical representatives

Daiichi Sankyos R&D Strategy

Daiichi Sankyo has committed a maximum of 20% of its annual sales towards research and
development. The company has hitherto conducted research only with antibody (protein-based)
drugs, which have limited applicability despite their effectiveness in the targeted location.
However, Daiichi Sankyo has now shifted its focus towards low molecular (chemical-based)
compounds, which have wider applicability, for all its new drugs. Daiichi Sankyo is also striving to
bind antibody drugs on to low molecular compounds and deliver them into the body so that the
benefit of targeted effectiveness is realized for a wider range of ailments. Daiichi Sankyo plans to
implement this approach in many of its therapeutic areas, including cancer. The shift towards low
molecular compounds is in line with Daiichi Sankyos integration plan that has been outlined in its
overall R&D strategy.

Daiichi Sankyos forthcoming activities in the cancer area include conventional low molecular
drugs as well as chemotherapy drugs. In the future, Daiichi Sankyo strives to conduct research
on molecular targets, mainly in biologicals and antibodies, and extend to low molecular-type
molecularly targeted drugs. However, many of the targets are in the early stages of the research
pipeline across therapeutic areas. This status will not allow Daiichi Sankyos cancer antibody
products to hit the market before 2015, by when the market for these products is likely to saturate
further. Daiichi Sankyo hopes to catch up sooner by implementing platform technology for
antibody drugs and targets through collaborations and deploying external resources.
Pain Points Post Merger

Despite possessing many competitive advantages, Ranbaxy faces allegations by the US FDA for
repetitive fraudulent conduct. According to the FDA, Ranbaxys move to use APIs from
unapproved sources has resulted in the availability of misbranded and counterfeit drugs in the
market. Subsequently, the FDA questioned Ranbaxy on the potency of its drugs, which are
alleged to be adulterated, and called for an internal review of the companys Indian manufacturing
operations. Ranbaxy has been under FDA scrutiny for about three years now and its operations
for the US market at the Paonta Sahib plant have been suspended since 2006. Although
Ranbaxy claims that this is a routine investigation and there is no cause for concern, the issue
has eroded its market capitalization significantly. As a culmination of this problem, Ranbaxy faced
a ban in September 2008 on the import of over 30 of its drugs produced in India with regards to
concerns over its manufacturing practices at a few of its facilities. Aside from this, Ranbaxy faces
patent infringement lawsuits by global branded drug manufacturers AstraZeneca and Pfizer.

Page #8

Daiichi Sankyo, at the other end, has suffered a heavy increase in selling, general and
administrative (SGA) expenses to the tune of 10% from fiscal 2006 levels to JPY357,330 million
($3128.9 million). During this period, the sales growth was a mere 0.4% and excluding one-time
effects, was still only 1.5%. Over the five-year period to fiscal 2007, Daiichi Sankyo recorded a
decline in sales by a CAGR of 0.7% while the CAGR for SGA expenses was 0.74% in the same
period. There also were unused R&D expenses to the tune of JPY8 billion ($70 million) in fiscal
2008. Although the companys SGA expenses declined by about 9% in fiscal 2008, sales in the
year witnessed a 5% decline due to a stagnant market and sales erosion from generic drugs.

Page #9

4.0

R&D Focus and Patent Portfolios-A Comparison

An analysis of the R&D expenditure patterns of Daiichi Sankyo and Ranbaxy provides a clear
indication on the leader and the follower.
R&D Focus Alignment with Business Growth

Ranbaxy
Ranbaxys research and development activities are focused towards five areas, viz., New Drug
Discovery Research (NDDR), Pharmaceutical Research, Chemical & Fermentation Research,
Herbal Drug Research, and Novel Drug Delivery Systems (NDDS). Ranbaxys NDDR research
program focuses on four therapeutic segments viz. metabolic diseases, respiratory diseases,
oncology and infectious diseases. In 2007, Ranbaxys drug discovery team filed 23 patent
applications in India.

Ranbaxy also forged a global alliance with GlaxoSmithKline plc, under

which two research programs in the respiratory and anti-infective therapeutic areas respectively
are being conducted. Ranbaxy also announced that from 1 January 2008, its research unit would
operate independently. In fiscal 2007 ended 31 March 2007, Ranbaxy filed 29 Abbreviated New
Drug Applications (ANDA) with the US FDA. Ranbaxys Herbal Drug Discovery division also
successfully launched two products (Chericof Herbal and Chyawan Active) in the Indian market
and three products in the international market. Ranbaxys Herbal Drug Discovery division alone
filed 11 patents in 2007. Ranbaxy is looking forward to making significant research developments
in specialized segments such as Biosimilars, Oncology, Oral Contraceptives, Respiratory and
Dermatology. Ranbaxys R&D expense and sales trends are depicted in the charts below.

Yr2003
Source: Ranbaxy

Page #10

Yr2004

Yr2005

Yr2006

100.5

85.5

73.2

51.1

110.5

Ranbaxy: R&D Expenditure ($ millions, 2003-2007)

Yr2007

Ranbaxy: Sales ($ millions, 2003- 2008)

Sales of Ranbaxy

1800

Sales of Ranbaxy (US $ Mn)

1600

Growth Rate (%)

30.00%

25.00%
1400
1200

20.00%

1000
15.00%
800
600

10.00%

400
5.00%
200
0

0.00%
FY2003

FY2004

FY2005

FY2006

FY2007

FY2008

Source: Ranbaxy

The major therapy areas of Ranbaxy are anti-infectives, cardiovascular, musculoskeletal, central
nervous system (CNS), respiratory and dermatologicals.

Daiichi Sankyo
Daiichi Sankyo already possesses high-potential products such as Olmesartan, Levofloxacin and
Pravastatin and is undertaking efforts to expand its research activity. Daiichi Sankyo is focusing
on various therapeutic areas including joint/bones diseases, allergies, immunity, cancer,
infectious diseases, glucose metabolic disorders and cardiovascular diseases. Olmesartan will
drive growth through fiscal 2010. To enhance its R&D capabilities, Daiichi Sankyo is building R&D
facilities in Europe, the US and Japan. In fact, the Daiichi Sankyo Research Institute based in the
US is expected to boost its research activity in the future. Daiichi Sankyo is also focused on
strengthening licensing activities as well as acquiring new technologies.

Page #11

Yr2004

Yr2005

Yr2006

Yr2007

1432

1459

1402

1340

1291

Daiichi Sankyo: R&D expenditure ($ millions, FY2004-2008)

Yr2008

Source: Daiichi Sankyo

Daiichi Sankyo: Sales ($ million, FY2004-2008)

Sales of Daiichi Sankyo

8600

Sales of Daiichi Sankyo (US $ Mn) 6.00%

5.00%

Growth Rate (%)

8400

4.00%
3.00%

8200

2.00%
8000

1.00%
0.00%

7800

-1.00%
7600

-2.00%
-3.00%

7400

-4.00%
7200

-5.00%

FY 2004
Source: Daiichi Sankyo

Page #12

FY 2005

FY 2006

FY 2007

FY 2008

With R&D perhaps playing the most important role in the success of these two players, it is
imperative to explore the intellectual property portfolio and the gaps that exist in greater detail.

The following sections of this report attempt to explore this facet of these companies in greater
detail.

Ia.

Patents Split-up across Players

Daiichi
Sankyo
39%

Ranbaxy
61%

Total Number of Patents (1998-2007):883

Ib.

Patents Split-up across application years

180
160

DaiichiSankyo

94

20 11

16 12

33

27

22

21

25

62

22 8

20

15

40

70

60

45

80

1998

1999

2000

2001

2002

2003

2004

2005

39

100

121

Ranbaxy
122

120

98

140

2006

2007

Total Number of Patents (1998-2007):883

A patenting frequency analysis across the application years of Ranbaxy and Daiichi Sankyo
revealed that while Daiichi Sankyos patenting activity peaked in 2007 (94 patent families),
Ranbaxys peaked in 2004 with 122 patent families respectively. Patenting activity in case of
Daiichi Sankyo has been rather mixed; with 2006 posting a whopping growth by 148% in the
number of patent families as compared to 2005.

Page #13

In contrast, Ranbaxy has witnessed a steady uptrend in its patenting activity until 2005. In 2007,
the companys patenting activity plunged by almost 60% as against 2006. Across the ten-year
period, Ranbaxy (with 541 patent families) accounted for nearly 61% of the total patent families of
both the companies.

II.

Patenting Frequency Analysis

Presence of IPC across Players

43

38
18

TotalIPCs

TotalIPCsof
Daiichisankyo

TotalIPCsof
Ranbaxy

Out of 43 IPCs, Daiichi Sankyo has a presence in almost 88% of the IPCs.
Ranbaxy has a share of 42% of the total IPCs segment.

An analysis on the portfolio of Ranbaxy and Daiichi Sankyo revealed that the patenting activity
was spread across 43 different IPC classifications. While Daiichi Sankyo had a more diverse
technology spread and had a presence in 38 IPCs, Ranbaxy had a presence in 18 IPCs.

Page #14

III.

IPC Analysis
Major IPCs for Ranbaxy Laboratories across application years
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998

A61K
C07D
A61P
C07C
OtherIPCs
0

IPC Code

20

40

60

80

100

120

140

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

A61K

11

16

40

75

65

29

25

C07D

17

13

28

43

55

11

A61P
C07C

Other IPCs
IPC

Definitions

A61K

Preparations For Medical, Dental, Or Toilet Purposes

C07D

Heterocyclic Compounds

A61P

Therapeutic activity of chemical compounds or medicinal preparations

C07C

Acyclic or Carbocyclic Compounds

A patenting frequency analysis for Ranbaxy Laboratories for the period 1998-2007 across IPCs
revealed 4 leading IPCs. IPC A61K (Preparations for medical, dental) stamped its dominance
with 275 patent families, followed by IPC C07D (Heterocyclic Compounds...) with 179 patent
families. IPCs A61P (Therapeutic activity.) and C07C (Acyclic or ..) followed albeit at a distance
with 28 and 27 patent families respectively. The leading 4 IPCs (with 509 patent families) shared
almost 94% of the total number of patent families taken for analysis.

Page #15

Major IPCs for Daiichi Sankyo Co Ltd across application years

2007
2006
2005
2004
2003
2002
2001
2000
1999
1998

A61K
C07D
C12N
A01N
OtherIPCs
0

IPC Code

20

40

60

80

100

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

A61K

16

11

10

29

56

C07D

15

16

C12N

A01N

Other IPCs

13

IPC

Definitions

A61K

Preparations For Medical, Dental, or Toilet Purposes

1
6

11

16

C07D

Heterocyclic Compounds

C12N

Micro-Organisms or Enzymes; Compositions Thereof

A01N

Preservation of Bodies of Humans or Animals or Plants or Parts Thereof; Biocides

15

Similarly, a patenting frequency analysis for Daiichi Sankyo across IPCs for the period 1998-2007
revealed 4 leading IPCs. Here again, similar to Ranbaxy, there was no change in the first two
leading IPC categories. IPC A61K (Preparations for medical, dental) emerged as the leader
recording a maximum of 158 patent families to its credit while C07D (Heterocyclic Compounds...)
followed with 62 patent families. Other leading IPCs included C12N (Micro-Organisms or
Enzymes) and A01N (Preservation of) with 15 and 12 patent families respectively. The
leading 4 IPCs (with 247 patent families) held almost 72% of the total number of patent families
taken for analysis.

IPCs A61P (Therapeutic activity.) and C07C (Acyclic or ..), which were among the leading
IPCs of Ranbaxy Laboratories didnt figure in the leading list in case of Daiichi Sankyo Co Ltd.
Similarly, IPCs C12N (Micro-Organisms or Enzymes) and A01N (Preservation of) were
missing among the leading list of IPCs in case of Ranbaxy.

Page #16

IV.

IPC Gap analysis

Unique IPC owned across Players
Number of IPCs

Total number of IPCs

43
Daiichi Sankyo only
25
Daiichi Sankyo & Ranbaxy
13
Ranbaxy only
5

Out of 43 IPCs, Daiichi Sankyo has monopoly of 58% of the total IPCs.
Ranbaxy has a share of 5 unique IPCs
Both the players together share the remaining 13 IPCs

IPC Gap Identification

An analysis across the IPC segments for Daiichi Sankyo and Ranbaxy revealed that patent
families of these companies were spread across 43 different IPCs. Daiichi Sankyo had a unique
presence in 25 of these IPCs, while Ranbaxy had a unique presence in 5 IPCs. However, a

Page #17

review of the patents in these 5 IPCs indicates that these dont pertain to any new drug
molecules.
Daiichi Sankyo Co. Ltd. Unique IPCs

Page #18

S.No

IPC

Definition

A01C

Planting; sowing; fertilizing

A01G

A01H

A01K

A01M

A21D

A23G

A23K

Fodder

A23P

Shaping or working of foodstuffs, not fully covered by a single other subclass

10

A45D

Hairdressing or shaving equipment; manicuring or other cosmetic treatment

11

A47K

Sanitary equipment not otherwise provided for; toilet accessories

12

A61B

Diagnosis; surgery; identification

13

A61L

Methods or apparatus for sterilising materials or objects in general; disinfection,

sterilisation, or deodorisation of air; chemical aspects of bandages, dressings, absorbent
pads, or surgical articles; materials for bandages, dressings, absorbent pads, or surgical
articles

14

A61M

Devices for introducing media into, or onto, the body; devices for transducing body media
or for taking media from the body; devices for producing or ending sleep or stupor

15

B01F

16

C07B

General methods of organic chemistry; apparatus therefore

17

C08F

Macromolecular compounds obtained by reactions only involving carbon-to-carbon

unsaturated bonds

18

C08K

Use of inorganic or non-macromolecular organic substances as compounding ingredients

19

C08L

Compositions of macromolecular compounds

20

C09K

Materials for applications not otherwise provided for; applications of materials not
otherwise provided for

21

C12Q

Measuring or testing processes involving enzymes or micro-organisms; compositions or

test papers thereof; processes of preparing such compositions; condition-responsive
control in microbiological or enzymological processes

22

F16J

Pistons; cylinders; pressure vessels in general; sealings

23

F26B

Drying solid materials or objects by removing liquid there from

24

G01N

Investigating or analysing materials by determining their chemical or physical properties

25

G06Q

Data processing systems or methods, specially adapted for administrative, commercial,

financial, managerial, supervisory or forecasting purposes; systems or methods specially
adapted for administrative, commercial, financial, managerial, supervisory or forecasting
purposes, not otherwise provided for

Horticulture; cultivation of vegetables, flowers, rice, fruit, vines, hops, or seaweed;

forestry; watering
New plants or processes for obtaining them; plant reproduction by tissue culture
techniques
Animal husbandry; care of birds, fishes, insects; fishing; rearing or breeding animals, not
otherwise provided for; new breeds of animals
Catching, trapping or scaring of animals; apparatus for the destruction of noxious animals
or noxious plants
Treatment, e.g. preservation, of flour or dough for baking, e.g. by addition of materials;
baking; bakery products; preservation thereof
Cocoa; cocoa products, e.g. chocolate; substitutes for cocoa or cocoa products;
confectionery; chewing gum; ice-cream; preparation thereof

Mixing, e.g. dissolving, emulsifying, dispersing

Ranbaxy Unique IPCs

V.

S.No

IPC

Definition

B07B

Separating solids from solids by sieving, screening, or sifting or by using gas currents;
other separating by dry methods applicable to bulk material, e.g. loose articles fit to be
handled like bulk material

C01D

C07J

Compounds of alkali metals, i.e. lithium, sodium, potassium, rubidium, caesium, or

francium
Steroids

C08G

C11B

Macromolecular compounds obtained otherwise than by reactions only involving carbonto-carbon unsaturated bonds
Producing (pressing, extraction), refining or preserving fats, fatty substances (e.g.
lanolin), fatty oils or waxes, including extraction from waste materials; essential oils;
perfumes

IPC Shift
IPC Shift in Ranbaxy across application years
20032007

300

19982002

250
200
234

150

148

100
50

41

31

19
9

20
7

A61K

C07D

A61P

C07C

IPC Code

C07H

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Total

A61K

11

16

40

75

65

29

25

275

C07D

17

13

28

43

55

179

11

28

A61P

Page #19

13
2

C07C

C07H

IPC

Definitions

A61K

Preparations For Medical, Dental, Or Toilet Purposes

C07D

Heterocyclic Compounds

A61P

Therapeutic activity of chemical compounds or medicinal preparations

C07C

Acyclic or Carbocyclic Compounds

C07H

Sugars; Derivatives Thereof; Nucleosides; Nucleotides; Nucleic Acids

27
2

15

An IPC analysis for Ranbaxy Laboratories in the initial period (1998-2002) established 5 leading
IPCs. The top four IPCs of this period figure among the top four IPCs in the overall period as well.
The all-time leading IPC technology A61K (Preparations for Medical, Dental ) led the list with
41 patent families. The 5 leading IPCs (with 90 patent families) contributed to almost 99% of the
total patent families in this period (1998-2002).

An IPC analysis for the period 2003-2007, identified 5 leading IPCs. The 5 leading technologies
of this period figured among the leading technologies (in a different ranking order) in the period
1998-2002 as well. The all time leading IPC; A61K (Preparations for Medical, Dental ) retained
its position in this period as well with 234 patent families. IPC A61P (Therapeutic activity),
which was placed at the third slot in the overall period occupied the fourth slot in this period
contributing to almost 4% of the total patent families in this period. The 5 leading IPCs (with 434
patent families) contributed to almost 96% of the patent families in this period (2003-2007).

IPC Shift in Daiichi Sankyo across application years

20032007

160

19982002

140
120
114

100
80
60

42

40
44

20

20

4
8

9
6

4
4

7
3

6
3

C07D

A01N

C12N

G01N

C07K

A23L

2001

2002

0
A61K
IPCs

1998

2000

2003

2004

2005

2006

2007

Total

A61K

16

11

10

29

56

158

C07D

15

16

62

A01N

12

15

10

C12N

G01N

C07K

A23L

Page #20

1999

1
2

IPC

Definitions

A61K

Preparations For Medical, Dental, Or Toilet Purposes

C07D

Heterocyclic Compounds

C12N

Micro-Organisms or Enzymes; Compositions Thereof

A23L

Foods, Foodstuffs, Or Non-Alcoholic Beverages

C07C

Acyclic or Carbocyclic Compounds

G01N

Investigating Or Analysing Materials By Determining Their Chemical Or Physical Properties

A01N

Preservation Of Bodies Of Humans Or Animals Or Plants Or Parts Thereof; Biocides

An IPC analysis for Daiichi Sankyo in the initial period (1998-2002) established 5 leading IPCs.
The all-time leading IPC technology A61K (Preparations for Medical, Dental ) led the list with
44 patent families. IPC G01N (Investigating or Analysing) which was absent in the overall
period emerged as one of the leading IPCs in this period. The 5 leading IPCs (with 82 patent
families) contributed to almost 69% of the patent families in this period (1998-2002).

During the subsequent period viz. 2003-2007, there were about 5 leading IPCs. The top three
IPCs were present in the overall period (1998-2007) as well. IPC A01N (Preservation of Bodies
) which was placed among the leading categories in the overall period was absent among the
top IPCs in this period (2003-2007). However, IPCs A23L (Foods, Foodstuffs), and C07K
(Peptides...) which were absent among the top IPCs in the overall period has the emerged among
the leaders in this period (2003-2007). The all time leading A61K (Preparations for Medical,
Dental ) maintained its position in this period also with 114 patent families. The 5 leading IPCs
(with 178 patent filings) contributed to almost 80% of the patent families in this period (20032007).

Page #21

VI.

Direct Citation Analysis

Ranbaxy
A direct citation analysis for Ranbaxy identified 12 leading assignees of 514 patent families
spread across 42 different IPC segments. Teva Pharma holds the maximum number of 19 patent
citations. Biocon Ltd and Lupin Ltd followed with 13 and 10 patent citations respectively. Other
leading assignees include Lek Pharmaceuticals Inc, Orchid Chemicals & Pharm Ltd and Pfizer
Inc with 9 patent citations each.

An IPC segment analysis mirrored the two leading IPCs of Daiichi. IPC A61K (Preparations for
Medical) had 233 patent citations while C07D (Heterocyclic Compounds) registered about 157
patent citations. The leading 12 assignees together contributed to almost 21% of the total patent
citations of Ranbaxy. The citation also includes Daiichi Sankyos two patent families
(WO2001066551 & its family members- Azole compounds as therapeutic agents for fungal
infections, and WO2000015198 & its family members- Orally administered controlled drug
delivery system providing temporal and spatial control) which had cited Ranbaxys patent
families.

Daiichi Sankyo
A direct citation analysis of Daiichi Sankyos patents/applications resulted in 840 patent families
spread across 168 IPCs. The analysis identified 9 leading assignees' of which Metabasis
Therapeutics Inc led the list followed by Astrazeneca AB with 11 and 10 patent citations
respectively. The other assignees include Ube Industries and Novartis AG with 8 and 7 patent
families respectively. The leading 9 assignees together shared almost 8% of the total patent
citations of the entire dataset.

Furthermore, across the IPC segments, A61K (Preparations For Medical) and C07D
(Heterocyclic Compounds) occupied the first and the second slot in terms of maximum patent
citations with 253 and 72 patent families.

Page #22

VII.

Therapeutic Indications
Ranbaxy
Ranbaxy-therapeutic indication

AntiRetrovirals
(6)

Bone
Disorder
Drugs (1)

Blood
Disorders
Drugs (1)

AntiDiabetics
(5)

AntiAsthmatics
(7)

Impotency
Drugs (2)

AntiHistamine
(6)

Hormones
(1)

Dermatologic
al Drugs (3)

UroGenital
Drugs(1)

1 to 5

Page #23

CNS Drugs
(49)

Anti-Cancer
Drugs (9)

AntiMalarials
(1)

GastroIntestinal
Drugs (4)

AntiInfectives
(34)

Supplements
(7)

6 to 10

Cardiovasc
ular Drugs
(16)

More than 10

List of therapeutic indications Ranbaxy

Therapeutic Indications

No. of compounds

CNS Drugs

49

Anti-Infectives

34

Cardiovascular Drugs

16

Anti-Cancer Drugs

Anti-Asthmatics

Supplements

Anti-Retrovirals

Anti-Histamine

Anti-Diabetics

Gastro-Intestinal Drugs

Dermatological Drugs

Impotency Drugs

Hormones

Anti-Malarials

Bone Disorder Drugs

Uro-Genital Drugs

Blood Disorders Drugs

Ranbaxy owns a range of 153 therapeutic drugs that are being used in 17 different therapeutic
indications globally. To its credit, it owns 49 therapeutic drugs focused on the treatment of central
nervous system (CNS) diseases such as hypertension, seizures, psychosis, depression etc. It
holds 34 active pharmaceutical ingredients for the treatment of infectious diseases. The topselling product Co-amoxyclav (amoxicillin and clavulanic acid) is an anti-infective agent that has
generated over $89 million in 2007. In the same year the second best selling product, Simvastatin
(Simvastatin) which has generated $86 million is among the 16 drugs for the treatment of
cardiovascular diseases. Additionally, Ranbaxy has a wide range of generic drugs targeted at
different segments including, anti-cancer drugs, anti-histamines, anti-retrovirals etc.

Page #24

Daiichi Sankyo

Daiichi Sankyo-therapeutic indication

AntiInfectives
(5)

Anti-cancer
Drugs (3)

Dermatologic
al Drugs (3)
Uro-genital
Drugs (2)

GastroIntestinal
Drugs (1)

Bone
Disorder
Drugs (5)

Cardiovascular
Drugs (10)

Blood
Disorders
Drugs (5)
Secretory
Drugs (1)

AntiHistamine (3)

Imaging &
Diagnostic (7)
AntiDiabetics (4)

Hormones (3)

Supplements (2)

More than 6

1 to 5

List of therapeutic indications - Daiichi Sankyo

Therapeutic Indications
Cardiovascular Drugs

Page #25

CNS Drugs
(6)

No. of Generic drugs

10

Imaging & Diagnostics

CNS Drugs

Bone Disorder Drugs

Blood Disorders Drugs

Anti-Infectives

Anti-Diabetics

Hormones

Dermatological Drugs

Anti-Histamine

Anti-Cancer Drugs

Uro-Genital Drugs

Supplements

Secretory Drugs

Gastro-Intestinal Drugs

Daiichi Sankyo owns 60 therapeutic drugs that are distributed globally with different brand names.
Though Daiichi Sankyo covers 15 therapeutic segments, its major focus has been in the
treatment of cardiovascular diseases and imaging & diagnostics having 10 and 7 drugs,
respectively. Other focus therapeutic segments include CNS drugs, bone and blood disorder
drugs, anti-infectives etc. Notable product, Benicar/Olmetec (Anti-hypertensive drug) was the top
seller for Daiichi Sankyo in 2007.

The analysis also indicates that Ranbaxy has a wider presence across therapeutic indications
when compared to Daiichi Sankyo. Furthermore, Daiichi Sankyo does not have a presence in a
few segments such as Anti-asthmatics, anti-retrovirals, impotency and anti-malarial drugs;
segments that Ranbaxy has a presence in. Similarly, imaging & diagnostics and secretory drugs
are unique to Daiichi Sankyos drug portfolio. The three top selling indications of Daiichi Sankyo
(with 23 drugs) accounts to almost 23% of the 3 top selling indications of Ranbaxy.

VIII.

Abbreviated New Drug Application (ANDA)

Daiichi sankyo

Ranbaxy

Barr
Pharmaceuticals

Teva Pharma

Abbreviated New Drug Application (ANDA)

1 1
2
1
4
3
6
1
3
6
1
4
1
1 1 1
7
4
2
5
1
2
1
1
2
1
2
2
2
1
2
1 1
3
2
1
2
1
10
1 1
4
2
1 1 1
3
3
7
3
1
3
2
1
2
3
1
5
4
10
1 1
1

2008
2007
2006
2005
2004
2003
2008
2007
2006
2005
2004
2003
2008
2007
2006
2005
2004
2003
2008
2007
2006
2005
2004
2003

2
5

1
7

6
12

6
4

1 1 1
4
1 1

6
7

Anti-Asthmatics
Anti-cancer Drugs
Anti-Diabetics
Anti-Histamine
Anti-Infectives
Anti-Malarials
Anti-retrovirals
Blood Disorders Drugs
Bone Disorder Drugs
Cardiovascular Drugs
CNSDrugs
Dermatological Drugs
Gastro-Intestinal Drugs
Hormones
Other indications
Supplements
Uro-genital Drugs

1
6

1
1

2
1 1 1

1
0

Page #26

12

16

20

24

28

An analysis of the Abbreviated New Drug Applications approved for Ranbaxy and Daiichi Sankyo
by US FDA (as on 6th sep08) for the period of Jan03-Sep08, revealed that the drugs approved
for Ranbaxy span across 8 therapeutic segments while Daiichi Sankyos spans across 3
therapeutic segments.

Both Ranbaxy and Daiichi Sankyo hold the maximum application approvals for Anti-Infectives and
Central Nervous System Drugs. However, Ranbaxy leads in the case of Anti-Infectives and CNS
Drugs segments with 24 and 14 approved drugs. The analysis also indicates that Ranbaxy has a
presence in therapeutic segments such as Anti-Diabetics, Anti-Histamine etc, wherein Daiichi
Sankyo has not filed/no drug approvals in the period (2003-2008).

A comparison of this activity with some of the peers provides interesting details. Teva
Pharmaceuticals holds the maximum ANDA approvals of 144 drugs spread across 13 therapeutic
indications. Of these, Anti-Infectives and CNS Drugs represent the majority share with 35 and 33
FDA approved drugs respectively. The unique therapeutic indications held by Teva
pharmaceuticals as compared to Ranbaxy and Daiichi Sankyo in this period include Hormones,
Gastro-Intestinal Drugs etc,

Similarly Barr Pharmaceuticals hold 54 ANDA approvals filed across 15 therapeutic segments.
The hormones and CNS Drugs segments lead the list with 21 and 13 drugs respectively. Unique
segments of Barr Pharmaceuticals include Hormones, Uro-Genital Drugs and Bone Disorder
Drugs.

Page #27

IX.

New Drug Application (NDA) & Biologic License Application (BLA)

New Drug Application (NDA) & Biologic License Application (BLA)

CNS Drugs
1

Cardiovascular Drugs
1

Anti-Asthmatics
1
2

Anti-Infectives
2

Ranbaxy

Daiichi
sankyo

Teva
Pharma

Cardiovascular Drugs
Anti-Histamine
Anti-Diabetics

An analysis across the New Drug Application and Biologic License Application approvals by US
FDA (as on 6th sep08) for the period of Jan03-Sep08 indicates 3 drug applications approved for
Ranbaxy (Anti-Histamine: 2 approvals, Anti-Diabetics: 1 approval) and 2 for Daiichi Sankyo
(Cardiovascular Drugs).

Teva Pharmaceuticals registered a maximum of 5 NDA and BLA approvals spread across 4
segments in this period. Anti-Infectives lead the list with 2 approved drugs, while Anti-Asthmatics,
Cardiovascular Drugs and CNS Drugs had one drug each.

However, Barr Pharmaceuticals did not show any drug approval in the corresponding period.

Page #28

5.0

Perspectives
The Daiichi Sankyo merger a strong precedent but with its own challenges!
The takeover of Daiichi Pharmaceutical by Sankyo Company in October 2005 resulted in the
reverse merger of Sankyo and Daiichi. Daiichi Sankyo, as a combined entity acquired
considerable strength after the merger by achieving critical mass in R&D both in the domestic
Japanese as well as international markets, and also became the second largest pharmaceutical
player in Japan. However, the worldwide integration of the two companies took place only in April
2007, after an 18-month long integration process. This was very much in line with what Sankyo
had envisaged way back in late 2005 when it launched its first Mid-term Business Management
Plan. Both companies did not envisage complete integration soon after the merger because their
focus remained on first integrating their prescription businesses. The integration of the other
businesses was the second priority as the main focus was on bringing to market some of its most
important drugs such as the antibiotic Levofloxacin and the anti-hypertensive drug Olmesartan.
The secondary objective was to expand into international markets.
However, in fiscal 2007, Daiichi Sankyo was unable to generate complete sales synergies and
faced significant setbacks in marketing. The company failed in its efforts to completely reorganize
its medical representatives base to create what it calls an MR Crosswise structure, which was
to serve as the basis for its growth in fiscal 2008. Already in the third year of its management
plan, the company is operating in a difficult business environment and needs to strengthen its
foundation significantly to achieve its targets for fiscal 2010. Daiichi Sankyo is already pouring
investments into expanding its sales force in Europe and the US as well as strengthening its
foothold in Latin America and Asia. As the Olmesartan drug is the companys growth engine
through fiscal 2010, investments are centered on this product.
The next challenge of Daiichi Sankyo is to develop new drugs that will boost its growth through
future generic erosion periods, in the medium and long term. Also, the company has expressed
its need to enhance its operating efficiency (13.7% operating margin in fiscal 2007) to be on par
with industry leaders such as GlaxoSmithKline, Bayer Schering and AstraZeneca, who have
recorded operating margins upwards of 20%. There is significant improvement needed in Daiichi
Sankyos cost structure by concentrating on procurement enhancement, global supply chain
efficiency. In light of the complete integration, Daiichi Sankyo faces a critical challenge viz.
consolidating its management framework to optimize group resources and integrating the culture
of Daiichi and Sankyo.

Page #29

Merger Motives: Reducing dependence on branded drugs

Beginning 2008, the cost of drug treatments is expected to decline particularly in the US market
across various therapeutic areas (largely due to the impending patent expiration of key drugs).
This will cause generic drugs across these therapeutic areas to seize a substantial market share.
Some significant generic areas include calcium channel blockers, lipid regulators, osteoporosis
therapies, proton pump inhibitors and selective serotonin reuptake inhibitors. Generics are seen
to pervade most pharmaceutical markets in the world, with over 65% of prescriptions written in
the US expected to be generic drugs. The use of generics is also driven in various other countries
through initiatives such as new government contracting in Germany and generic educational
programs in Italy, Japan and Spain. Competition in biogenerics is also expected to rise.

In light of these transitions in the global pharmaceutical marketplace, large and small innovators
are striving to devise strategies to align themselves better with the new opportunities realizing
the generic and emerging market potential. Major pharmaceutical innovators have adopted the
obvious strategy of strengthening their drug pipelines with more focused discovery and
development initiatives including combination therapy and targeted drug development, as well as
incorporating better product lifecycle management tactics. At the same time, these large players
have sought to reduce their dependence on prescription pharmaceutical drugs for growth and
have made a large number of expensive acquisitions of / or collaborations with successful or
high-potential generic drug manufacturers. Thus, Daiichi Sankyos acquisition of Ranbaxy signals
a move on the lines of its global counterparts Novartis (which acquired Alcon, Sandoz, Hexal AG
and Eon Labs) and local competitors Astellas Pharma, Eesei and Takeda Pharmaceutical.

Page #30

Managing the intangibles

The immediate risk that both Ranbaxy and Daiichi Sankyo face is the possibility of a disparity in
company cultures, which could pave the way for fallout in the future. Aside from the working
cultures in the two countries, business cultures of both the companies are very different. Also, the
past acquisitions of generic drug companies by innovators have resulted in both companies being
operated as independent entities rather than merging the individual cultural frameworks. Hence,
Daiichi Sankyos plans for operating Ranbaxy as an independent company and its noninvolvement in Ranbaxys inorganic growth initiatives will probably work well for both companies.
Nevertheless, some integration will be inevitable to expand the scope of the companies research,
manufacturing and marketing functions in order to realize synergies and gain a strong pan-global
position. This will likely result in a future-Ranbaxy that is less Indian in its outlook but more of a
first-world economy company. The new Ranbaxy will possibly be imparted with more caution and
deliberation, which are characteristics of Japanese players.

The merger announcement has come immediately after Ranbaxys settlement of its patent
dispute with AstraZeneca regarding the generic sales of the latters blockbuster ulcer drug
Nexium in favor of the latter. Also, Ranbaxy made an out-of-court settlement with Pfizer recently
over the Lipitor drug. Although the settlement with Pfizer delayed Ranbaxys launch of generic
Lipitor, it has provided Ranbaxy with the status of exclusive generic representative of Pfizer and
the license for early launch in some of the global markets. The settlement has also provided
Ranbaxy with a lot of certainty in the timeframe for the launch of generic Lipitor and has brought
down its estimate of future litigation expenses. Although Ranbaxy began negotiating with Pfizer
and AstraZeneca much earlier, the recent settlements reflect Daiichi Sankyos possible influence
and facilitation of well-timed moves.

The Ranbaxy-Daiichi Sankyo deal also unveils the need for the companies to consolidate their
intellectual capital and acquire an edge over their foreign counterparts operating in, to begin with,
the Indian market. The deal is already viewed as an indication of Japanese companies displaying
confidence in Indian pharmaceutical firms with a reinforced faith in the commitment of Indian
players towards intellectual property rights. With Ranbaxy under its umbrella, Daiichi Sankyo is
poised to share Ranbaxys leadership in the Indian pharmaceutical market in terms of patent
filings by homegrown companies. The next challenge for Ranbaxy is to take on competition from
foreign rivals such as AstraZeneca, Pfizer, Novartis and Merck in filing patents in India.

Page #31

6.0

Conclusion
Daiichi Sankyos move of acquiring Ranbaxy will enable the company to gain the best of both
worlds without investing heavily to the generic business. It is Daiichi Sankyos way of doubling the
benefits or at least covering the shortcomings in the outcome of Sankyos acquisition of Daiichi
by gaining access to an innovative platform covering biologicals and anti-cancer drugs, and a
vast pool of scientists all at Indian costs. Through the deal, Ranbaxy has become part of a
Japanese corporate framework, which is extremely reputed in the corporate world. As a generics
player, Ranbaxy is very well placed in both India and abroad although its share performance
belies its true potential. Ranbaxy is also an emerging branded drug manufacturer possessing
tremendous clout in terms of strategic alliances with some of the biggest players in the industry.

The extent to which Ranbaxy and Daiichi Sankyo are complementary is rather unique in the
industry. Unlike several mergers where removal of redundant assets and practices is mandatory,
Ranbaxy and Daiichi Sankyo complement each other across geographies as well as product
portfolios, leaving very little need for rationalization, thus minimizing post-acquisition hurdles.
Furthermore, Japan is fast embracing generic drugs and in light of the growing ageing population
in the country, Daiichi Sankyos propulsion of Ranbaxys generic drugs will expand its Japanese
market.

Given Ranbaxys intention to become the largest generics company in Japan, the acquisition
provides the company with a strong platform to consolidate its Japanese generics business, an
important market of its largest geographic segment, Asia. Many of Ranbaxys counterparts,
including Zydus Cadila and Lupin Ltd., have entered Japan with the same intention through
acquisitions of smaller Japanese players or greenfield ventures.

However, the recent ban on the US imports of more than 30 Ranbaxy drugs manufactured in
India until concerns are allayed poses a risk to Ranbaxys growth in the US and in turn, its
international markets. The companys US sales are estimated to be impacted by 10%-15% as a
result of the ban. While Daiichi Sankyo has stressed that it going ahead with the deal, it does
raise some concerns over the impending benefits and has in fact already affected Ranbaxys
share performance in September 2008.

For the present, Ranbaxy remains a company burdened by debt and litigation expenses and no
incentive for innovation thanks to drug policies in the domestic market. The deal will make
Ranbaxy a zero-debt company. In the long term, Ranbaxy stands to gain in its mission to become
a leading global innovative pharmaceutical company, which will be propelled by the acquisition.
The move represents a step towards aligning with the paradigm shift happening in the global
pharmaceutical industry. The acquisition corroborates the strong possibility for similar moves in

Page #32

the future as more innovative pharmaceutical companies are displaying a zeal for entering the
generic business. The deal is also said to improve the engagement between India and Japan and
foster greater cooperation between the two nations in the pharma arena. The Daiichi Sankyo deal
also sets the tone for more Japanese companies displaying confidence in Indian pharmaceutical
firms and reinforces their faith in the commitment of Indian players towards/ and respect for
intellectual property rights. Global companies are reassured that Indian patent laws are becoming
robust and homegrown Indian pharmaceutical giants might now have a chance to become
national leaders with the backing of foreign parent companies that respect their independence.

Page #33

Annexure Patent Analysis Methodology

The following methodology was adopted for analyzing the retrieved patent documents. All patent
documents have been downloaded from the MICROPAT database for the 10-year period (Jan 1998 to
Feb 2008).

Patent portfolio comparison

Analysis and comparison of patenting activity of Ranbaxy, and Daiichi Sankyo Co Ltd

Patenting activity - 10 years

Patent documents filed during the last 10 years (Jan 1998 to June 2008) by Ranbaxy and Daiichi Sankyo,
along with their subsidiaries were taken for analysis. Only one member per patent family was considered
for analysis. Preference for one member per family was based on the following order; US grants US
applications PCT EP publications EP grants JP GB. Micropatent database was used to retrieve
the patent related data and Delphion was used to retrieve the subsidiary list for each company.

Collection of Patent documents

Patent portfolio of the 2 companies retrieved for the last 10 years indicates a total of 1,796 patent
documents filed by Ranbaxy and Daiichi Sankyo in various technology spaces. A drill down of these
patent documents indicates that Daiichi Sankyo had 567 patent documents while Ranbaxy had 1,229
patent documents. All subsequent analysis was performed based on this initial dataset of 1,796.

One member per family

Each invention could have more than one patent, as it could be filed in more than one country. Such an
evaluation inclusive of family members may distort the analysis. For instance, the IPC of a patent
document with high number of family members may rank at the top of the IPC frequency list instead of the
IPC which has more number of individual patent documents. Therefore, the 1,796 patent documents were
reduced to one member per family using Micropatent database. This resulted in a total of 883 patent
families shared by the companies as follows: Daiichi Sankyo 342 and Ranbaxy 541.

Data points such as patent number, publication year, application year, assignee and primary IPC code
were also obtained from the Micropatent database for the family reduced dataset prior to performing the
IPC trends analysis.

Page #34

Patent Split-up

The overall patent portfolio of the two companies was analyzed across 10 years to determine the
patenting activity of the companies irrespective of technology and years. In addition, a company-wise
patent split-up across years was also identified and is graphically represented.

Patenting Frequency Analysis

This analysis indicates the patenting activity of Ranbaxy and Daiichi Sankyo Co Ltd across various
technology spaces with respect to the application years (1998-2007). Given, the rather huge data set that
needed to be visually represented, patenting frequency in the top IPCs were projected in the graph while
the other IPCs were categorized in other IPCs.

Leading IPCs

The leading IPCs for both the companies were sorted and analyzed across years. The 10 year period
was split into two time periods (1998-2002, 2003-2007) to identify any possible shift in technologies for
the companies; thereby indicating the focus technology space of each company in two given time periods.

R&D Expenditure

Research & Development expenditure of Ranbaxy and Daiichi Sankyo from 2002 to 2007 was retrieved
from the respective annual reports of each company. The R&D expenditure of Daiichi Sankyo for the
years 2002 to 2005 was a simple aggregation of the R&D expenditure of Daiichi and Sankyo.

IPC Gap Analysis

The similarities and gaps in the technology space between the two companies were identified by
screening the IPCs (primary IPCs) which were common to both the companies. The analysis identified 13
IPC segments shared by both the companies while the patents filed under the remaining 30 IPC
segments were owned by one of the 2 companies. An analysis of this data was used to identify the gaps
in the technology.

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Patenting activity across technologies and IPC shift

Patenting activity of Ranbaxy and Daiichi Sankyo for 1998 2007 was clustered with respect to
technologies. Technology wise patenting activity of the two companies across the years was analyzed
using IPCs. The IPCs pertaining to each company was then sorted with respect to application years to
indicate technology wise patenting activity in each year for the two companies. The major IPC shift across
various time periods was also analyzed.

Citation Analysis

Direct citation frequency analysis was conducted for the patent documents (along with its family
members) of both Daiichi Sankyo and Ranbaxy. The analysis was conducted to identify the assignees
that have cited the source companys patent documents.

Therapeutic Indications

Therapeutic drugs possessed by Ranbaxy and Daiichi Sankyo were retrieved from the respective
company websites and other available free web sources. Each therapeutic drug was clustered in a broad
segment based on their application and taken for analysis. A total of 153 and 60 therapeutic drugs were
obtained for Ranbaxy and Daiichi Sankyo, respectively.

Product Pipeline

Pipeline details for Ranbaxy and Daiichi Sankyo was retrieved from their company websites, annual
reports, presentations, along with additional free web databases on pharmaceutical product pipeline, as
available.

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PROCESS FLOW CHART

Patent activity 10 years

Collection of Patent documents

Reduction to one member per family

Patenting
Frequency
Analysis

NDA / ANDA

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Citation
Analysis

IPC
Analysis

R&D
Expenditure

IPC Gap
Analysis

IPC Shift

Patent
Split-up

Therapeutic
Indications

APPENDIX I ABOUT SCOPE e-KNOWLEDGE CENTER

Scope e-Knowledge Center is an award-winning provider of intellectual property support services. Clients
include large corporate organizations (including seven FTSE 100 companies), Thomson Scientific, the
European Patent Office, global law firms and several of the largest technology transfer companies in the
world.

Scope helps clients to enhance their IP capabilities and achieve substantial cost savings, in region of 40
to 60%. Services include:

Patent searching: Prior art, validity, infringement, freedom to operate, etc. For example, Scope
undertakes complex searches on a regular basis for corporates in various sectors including engineering,
pharma, food & beverages, chemicals, etc.

Patent analysis for competitive intelligence and business development: Leveraging on its expertise
in business research support, Scope enables clients to understand better their market environment and
identify profitable opportunities through a variety of bespoke studies, including: white space analysis of
specific technology areas; identifying potential licensing candidates; patent / CI landscape analysis;
overlap analysis to determine potential out-/in-licensing & cross licensing, opportunities, etc.

Database enhancement for patent portfolio management: Scope helps clients to make the most of
their internal patent and information repositories, leveraging on its world-class in database building and
information architecture.

Tracking and monitoring patent applications / status on a bespoke basis. Scope keeps track of any
new patent applications in specific technology areas or filed by specific companies. It also monitors the
legal status of specific patent applications (ie maintenance of surveillance lists).

Scope e-Knowledge Center has been in operation for over 20 years. It is headquartered in Chennai, India
and has several sales offices around the world. You can reach us at:
Contact us:

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Headquarter

USA

UK

Netherlands

R.Sivadas
CEO
Tel:+91 44 24314201
siv@scopeknowledge.com

Ken Bozler
Senior Vice President of Sales
(M) +1 813.892.4752
kbozler@scopeknowledge.com

Hector Bolaos
General Manager
Tel: +44 20 7096 0493
(M): +44 7880 557400
hector@scopeknowledge.com

Anindya Panda
Asst. Business Development Manager
Tel:+91 44 24314201
(M) +91 98846 09689
anindyapanda@scopeknowledge.com

Andrew Peterson
Executive IP & Research Sales
(M) +1 847.337.0509
apeterson@scopeknowledge.com

Ms. Priya Sinha

Business Development
Manager
Tel / Fax: +31 (0) 35
7511 000
priya@scopeknowledge.com

Disclaimer

This material is based upon information that we consider reliable, but we do not represent
that it is accurate or complete, and it should be relied upon as such.
Neither SCOPE e-KNOWLEDGE CENTER PRIVATE LIMITED nor any person connected
with it accepts any liability arising from the use of this document.
Opinions expressed are our current opinions as of the date appearing on this material only.
While we endeavor to update on a reasonable basis the information discussed in this
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so.
No part of this material may be duplicated in any form and / or redistributed without the prior
written consent of SCOPE e-KNOWLEDGE CENTER PRIVATE LIMITED

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