There has been a lot of chop and change at Ranbaxy or Sun Pharma in South Africa in recent years. The company’s global ownership has changed, the demand for products is always shifting and there has been uncertainty about major contracts. Nevertheless, this innovative organisation is still leading the way in SA and will continue to be a healthy asset for customers all over the country.
In recent times, things have not been easy for South Africa’s pharmaceutical companies. After decades of sustained growth and development, these companies have become global leaders in research, innovation and production of a range of products, but after the 2009 financial crash and with the emergence of a global market full of competition, our pharmaceuticals businesses are finding things a little more difficult.
According to world-renowned professional services company PwC, “the challenges are well known and include declining profitability, thinning pipelines, growing generic competition, and skyrocketing operating and marketing costs… Companies will need to decide how to satisfy contending stakeholder demands while pursuing sustainable growth in a competitive market.”
Of course, the pharmaceutical business relies on the success of other markets. The performance of the wider healthcare industry can impact on pharma trade and in South Africa right now, the healthcare industry is navigating its own set of challenges including the price vs. value war, the number of under-insured and uninsured people and the ongoing concern surrounding quality of care.
However, despite the bleak economic outlook that the country is now facing, pharmaceuticals companies are well positioned to build on a robust history.
According to Deloitte, South Africa’s pharmaceutical market, the largest in Sub-Saharan Africa, totalledan estimated $3.9 billion in 2013and is anticipated to growup until 2018 by an average of six percent a year, to an estimated $5.1 billion– perhaps this was a driver behind the decision announced recently in President Zuma’s SONA that the government has formed a new pharma company, Ketlaphela, which will focus on the supply of anti-retroviral drugs.
Another pharma-company that has seen much development over the past few years is Ranbaxy, or Sun Pharma.
Sun Pharma South Africa is ranked amongst the top eight generic pharmaceutical companies in the country and is engaged in the sales and distribution of generic prescription, over-the-counter (OTC) and originator prescription products. The company also offers generic anti-retroviral (ARV) medicines to needy patients in Southern Africa, supporting national governments in their effort to control the AIDS epidemic.
With a state-of-the-art production facility in Roodepoort, Sun Pharma manufactures analgesics, cold, cough and flu preparations, anti-histamines, anti-hypertensives, CNS drugs, vitamins and minerals, and a comprehensive range of OTC products, all of which are manufactured in various dosage forms including tablets, capsules, oral liquids, creams and gargles. These are marketed in the South African as well as neighbouring markets.
In 1996, Indian-owned firm Ranbaxy Laboratories Ltd opened its doors in South Africa as part of the company’s global growth strategy. In 2010, the company opened its $30 million state-of-the-art manufacturing facility, the Be-Tabs Pharmaceuticals Manufacturing Plant,just west of Jo’burg– the company’s third facility in Africa.
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At global level, Ranbaxy began to perform poorly under the management of Japanese company, Daiichi Sankyo and in 2014 it was announced that Sun Pharma would take over the business, particularly interested in its strong presence in the USA, in a deal worth $4 billion. In 2015, the deal was finalised bringing Ranbaxy under the Sun Pharma umbrella, creating the world’s fifth largest specialty generic pharmaceutical company.
In South Africa, the business remained running as normal but welcomed greater resources.
“It is an important milestone in our long association with the industry,” said CEO Desmond Brothers.
“The combined entity will be branded ‘Sun Pharma’, which has a stronger global recognition. There will be no change in the name of the legal entity in South Africa and will remain Ranbaxy Pharmaceuticals (Pty) Ltd. With the enhanced resources, technology and operational capabilities, we are now all set to serve [customers] even better.”
However, sources close to the Indian headquarters have been quoted in local media as having doubts over some of the South African operations. Some reports have suggested that Sun Pharma may not be keen on taking the South African HIV medicine program forwards, after it won the $140 million contract to supply drugs in 2010.
In some of its business divisions around the world, especially in Europe, Sun Pharma has made it clear that it is looking to divest.
“For Sun Pharma, the focus has been the US and rest of the world markets, while Ranbaxy has a huge presence across the world. The company will divest unprofitable geographies in Europe, as well as the API business which is not a priority for the new owner,” said Sarabjit Nangra, VP, research-pharma, Angel Broking.
Interestingly, at a global sales level, the company has been trying for some time to bolster its presence in North America and the acquisition of Ranbaxy has gone some way towards helping this. But one of the main barriers to the new market has been problems with quality control. Some Indian-manufactured products have not met US standards but there has been reports suggesting that the business could look to its subsidiaries in countries such as South Africa, where quality standards are high, to supply to the lucrative American market. However progress in this regard is yet to be seen.
“We have invested significantly on new equipment, which will enable us to improve our output capability — and this is very much an ongoing process. For the local business we are presently well equipped to supply to South Africa and our four neighbours (Botswana, Lesotho, Namibia and Swaziland). We are currently working to develop as a South African manufacturing hub to supply to Ranbaxy operations in sub-Saharan Africa,” the company said.
“We are looking at high volume movers across all therapeutic classes and will look to bring in the top new molecules in the prescription arena as well as to expand our existing OTC business.”
In a recent financial report, for the third quarter 2015, Sun Pharma Global MD, Dilip Shanghvi said: “Our results for Q3 indicates sequentially improving quality of business and performance. This is despite adverse currency movements and increase in R&D investments. The synergy benefits of the Ranbaxy acquisition have begun to reflect in our financials. We remain committed in allocating required resources for enhancing our specialty and complex generics pipeline.”
The results highlight the strength of the company and its influence in the industry and while its Rest of the World (ROW) business is still a growing concern, it seems that Sun Pharma will devote the necessary resources to operations like South Africa that perform well and are well managed.