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The key strategic investments made by the erstwhile promoters of Ranbaxy Laboratories may seem to be floundering on the surface, but the Daiichi-owned company is looking at bigger engagements with at least two of these companies.
Ranbaxy, originally promoted by the Singh family, was acquired by Japan's Daiichi Sankyo late last year. The company had bought stakes in four drug companies - Zenotech, Orchid Pharma, Jupiter Bioscience and Krebs Biochemicals - before the acquisition.
Each of these investments, made during 2007-08, was expected to bring in additional business opportunities for Ranbaxy. The total investments made by Ranbaxy in these companies could be around Rs 300 crore (Rs 3 billion), analysts say.
The investments in the three biotech ones - Zenotech, Jupiter and Krebs - were seen as Ranbaxy's attempts to ensure a steady flow of bio-similar or off-patented low cost biotechnology medicines when the bio-similar market opens up in the developed countries in a big way.
Orchid was meant as Ranbaxy's production platform for key conventional drugs, after two of its production facilities came under the US drug regulator's scanner.
Ranbaxy and Zenotech are looking at collaborating for clinical trials even though they are engaged in various legal battles in the courts and the Company Law Board.
"The company (Ranbaxy) will also undertake clinical trials for some of our products under development," Jayaram Chigurupati, Zenotech's managing director, told Business Standard.
Ranbaxy has a 46.85 per cent stake in Zenotech and is in the process of increasing its stake through a mandatory open offer from its parent company, Daiichi. The open offer price is one of the contentious issues that is being legally fought now.
There is also no disturbance to the flow of biopharmaceutical products from Zenotech to Ranbaxy's marketing channels.
"At the operational level, Ranbaxy continues to market our products," he added.
In Jupiter Bio, Ranbaxy made a silent exit by not exercising its right to convert the equity share warrants issued by Jupiter for a 14.9 per cent stake in that company. Ranbaxy also forfeited over Rs 9 crore (Rs 90 million) which it had paid as advance while agreeing to purchase the share warrants from Jupiter.
However, despite the lapse of the warrants, Ranbaxy has been engaged in working out a broad-based partnership with Jupiter in the past two months.
"The agreement Ranbaxy had while it invested in Jupiter was to collaborate in the development of peptide-based drugs. Today, even without any investment commitment, Ranbaxy is in talks with us for development of medicines in three areas - peptide, green chemistry and conventional organic chemistry. The deal could prove more exhaustive than the earlier one," said Venkat R Kalavakolanu, CMD, Jupiter.
Its investments in the other two companies - Orchid Pharmaceuticals and Krebs Bio - have not resulted in any tangible business partnerships.
Atul Sobti, CEO and MD of Ranbaxy, attached strategic value to the company's investments in Zenotech but termed others as mere financial investments. "We will exit Orchid the day we see the right value," Sobti said. Investment in Krebs is minuscule, he added.
Ranbaxy has close to 15 per cent stake in both Orchid and Krebs.
"No progress in terms of revenue booking has happened from the agreement. They (Ranbaxy) have not contacted us after we signed an agreement last year," Orchid spokesperson said.
Prior to the Daiichi takeover, Ranbaxy had stated that these "strategic investments" were meant to fill gaps in the product portfolio and leverage its extensive front-end marketing presence and regulatory expertise with the technical capabilities these companies brought in.
While the Krebs investment was aimed at providing Ranbaxy access to low-cost manufacturing of fermentation-based products, Jupiter was meant to help the company in the development and manufacture of peptide products.
Zenotech's robust product portfolio in the bio-similar and oncology segments, covering approximately a third of the current biopharmaceutical market, was the projected attraction. Similarly, the agreement with Orchid envisaged a business alliance involving multiple geographies and therapies for both finished dosage formulations and active pharmaceutical ingredients.
