Ranbaxy ups Zenotech stake to tap biotech

Ranbaxy Laboratories Ltd, India’s second-biggest drugmaker, has agreed to take control of Zenotech Laboratories Ltd to gain access to the $65 billion market (about Rs 2,50,000) for biotechnology treatments.

Ranbaxy will buy shares from founders of the Hyderabad-based company as well as new stock to increase its stake to 45 per cent, it said in a statement today. The Gurgaon-based drugmaker will offer to buy an additional 20 per cent from investors under stock exchange takeover rules, it said.

The acquisition gives Chief Executive Officer Malvinder Singh control over research and production of drugs based on generic biotechnology, or living cell-based products, that are harder to make than chemical medicines. Companies including General Motors Corp are pushing the US to allow copies of biological medicines as a way to reduce healthcare costs.

The acquisition “provides Ranbaxy with a skill into a business which has higher entry barriers, allowing for greater profitability,’’ said Sarabjit Kour Nangra, an analyst with Angel Broking Ltd in Mumbai, who has a “hold” rating on Ranbaxy’s stock.

Zenotech shares rose by their daily limit on the Bombay Stock Exchange. The stock has more than doubled this year, valuing the drugmaker at about $121 million (about Rs 480 crore). Ranbaxy fell 0.5 per cent, eroding its 13 per cent gain this year.

Ranbaxy will pay Rs 214 crore to increase its stake to 45 per cent. The drugmaker will buy 22 per cent from Zenotech’s founders, including Chief Executive Officer Jayaram Chigurupati, and an additional 16 per cent in preferential stock.

(Source: Business Standard)

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