Mumbai: Ranbaxy Laboratories Ltd, India's biggest drugmaker, rose as much as 5.6 per cent, the highest in more than three years, following reports that Pfizer Inc may make a hostile bid, trumping an agreed $4.6 billion buy-out by Japan's Daiichi Sankyo Co.

Ranbaxy Laboratories closed 4.3 per cent (Rs23.10) higher, at  Rs567.15, on the Bombay Stock Exchange (BSE).

Pfizer, the world's largest drugmaker, may offer to buy the outstanding 65 per cent of Ranbaxy that is mostly held by financial institutions, reports said.

Financial institutions hold 41.28 per cent stake in the company, with insurance companies holding a total of 19.88 per cent of which LIC alone holds 15.84 per cent. Foreign institutional investors (FIIs) hold 17.95 per cent stake, while the public holding is 21.24 per cent. 

An acquisition of Ranbaxy would help Pfizer gain control of the generic version of its largest selling patented drug, Lipitor. The anti-cholesterol drug has around $12 billion annual sales.

Ranbaxy is scheduled to launch a generic version of Lipitor in the United States in less than two years. It has the right to sell its generic version of Lipitor for 180 days, from March 2010.

The report comes after Ranbaxy's founding family agreed to sell its 34.8 per cent stake to Japan's Daiichi Sankyo. Daiichi Sankyo is offering Rs737 a share for Ranbaxy.  (See: Japan's Daiichi Sankyo to acquire majority stake in Ranbaxy and Ranbaxy struck deal at appropriate time: PwC). Daiichi also said it would make an open offer to bring its stake to 50.1 per cent, in a deal it valued at around $4.6 billion.

Gurgaon-based Ranbaxy, like several other Indian pharmaceutical firms, makes cheaper generic versions of off-patent drugs after filing an application with the US drug authorities.

Daiichi's agreement with Ranbaxy Laboratories is expected to spawn several such attempts by foreign companies eager to get hold of low-cost production processes and facilities.

India's own pharmaceutical industry is expected to be worth $20 billion by 2015.

With stiff competition from generic drugs, and tougher regulatory environments at home, drug giants like Pfizer and GSK are on the look-out for cost-cutting ways, including shifting production bases and adopting cheaper production processes.

Ranbaxy's worlwide presence is also an attraction for drug firms looking to increase sales volume.

Ranbaxy, however, insisted the deal with Daiichi was binding and sealed.
 
Analyst say other large Indian drug firms such as Cipla Ltd, Dr Reddy's Laboratories Ltd and mid-sized Aurobindo Pharma could also be potential targets.