Impact: The market size of Diovan is estimated to be at US$2.2bn in the US, and Ranbaxy holds a sole exclusivity for the product. Though it will be launched through Ohm's Labs in the US, we expect the company to outsource the API through a partner (as was the case of Lipitor). This would trim the potential opportunity as the company will have to share a part of its profits with the partner. We, however, believe that the share may be smaller (~30% as against ~45% for Lipitor) as API sourcing for gDiovan should be easier given that multiple players are awaiting an approval post Ranbaxy. Assuming a 50% market share and 50%...

We Upgrade to Buy: We believe the risk/reward is turning favourable for Ranbaxy given the turnaround expectations from the new management. Though we remain skeptical of Ranbaxy's business model on a standalone basis, we argue that both companies will now trade in-line with one's performance impacting the other (positively/negatively). The acquisition ratio of 0.8:1x implies a target price of Rs598 for Ranbaxy (based on our Sun Pharma's target price of Rs748). The implied target price is ~5% higher than our SOTP based calculation, which we...