Here's why the Ranbaxy deal could turn out to be a nightmare for Sun Pharma

The Sun Pharma - Ranbaxy merger tops the list of some of the most interesting deals that the pharma space has seen in the last decade, setting a trend for consolidation among the large domestic companies.

While the deal has got a thumbs up from most analysts, there are a few challenges that Sun Pharma will have to face on the ground.

1: Achieving Compliance: With the baggage of regulatory issues, the biggest challenge for Sun Pharma will be to restore and regain trust and confidence of the regulators, especially in the US. Four of Ranbaxy plants are banned by USFDA and is under an ongoing consent decree

2: Integrating Marketing Forces The combined Sun-Ranbaxy entity will be the undisputed leader in the Indian market. While the merger will pump up the feet on the ground presence for Sun Pharma in India to an enviable presence – a combined strength of 9000 medical representatives - this will lead to the biggest operational challenge. Marrying the two culturally different marketing entities will be a key task for Sun. The two companies have operated under different work cultures, giving different margin bonuses and streamlining the two to a common platform will be crucial for Sun to maximize on the merger’s India advantage. Sun though is confident and says the complimentary portfolios will see $250 millio synergies by the end of third year.

3: Managing Multiple Units The merger gives Sun grand global exposure. The combined entity will have 47 manufacturing facilities across 5 continents. These diverse number of plants would mean increase oversight and could be a regulatory nightmare. Experts point out that Sun may eventually have to look at hiving off or consolidating some of them the manufacturing capacities. Also because there could be some overlaps and not all capacities may be needed.

4: Ranbaxy Brand Will Cease to Exist Though this is not a challenge, but one of the oldest generic drug brands with the highest recall value will cease to exist eventually. Experts say this may lead to some confusions in the marketand impact the morale of the Ranbaxy employees. After its brand image took a serious beating on the $500 million settlement with the US Department of Justice and over questions on its drug qualities, Arun Sawhney, managing director & CEO, Ranbaxy, in a June 2013 interview to CNBC TV18 had said, “The building of the Ranbaxy brand is from now.”

Pharma observers say it is unfortunate to see that in less than a year Ranbaxy brand is now headed for extinction.

Archana Shukla is a reporter with CNBC-TV18