The Japanese pharmaceutical company Daiichi Sankyo’s move this week to buy a controlling stake in the Indian pharmaceutical company Ranbaxy Laboratories for up to $4.6 billion is a pending marriage that reflects the rising importance of generic drugs, the growing role of emerging markets, and the need of innovator pharmaceutical companies to access lower cost R&D and manufacturing assets.

In making the announcement, Takashi Shoda, president and CEO of Daiichi Sankyo Company, said, “The proposed transaction is in line with our goal to be a global pharma innovator and provides the opportunity to complement our strong presence in innovation with a new, strong presence in the fast growing business of non-proprietary pharmaceuticals”

Daiichi Sanyko is now among the few innovator drug companies that have recently made a push to increase their market presence in generics. Novartis did it with its multi-billion purchase of Germany’s Hexal and a controlling interest in US-based Eon Labs in 2005.

With the move to acquire a stake in Ranbaxy, Daiichi Sankyo gains not only a leading generic drug company and one of India’s largest pharmaceutical companies, but also access to a low-cost R&D and manufacturing base, particularly in India. A similar move was made by the generic drug company Mylan Laboratories, which acquired a controlling interest in India’s Matrix Laboratories in 2007.

With Ranbaxy, Daiichi Sankyo would also increase its market presence from 21 to 56 countries and enhance its ability to serve emerging markets. Consider the information offered by Daiichi Sankyo in making its announcement. By 2030, the pharmaceutical industry in the BRIC countries (Brazil, Russia, India, and China) is expected to reach $330–$420 billion, compared with a market size of only $56 billion in 2006. To put into perspective, that projected share from those emerging markets would equal the size of the North American and Japanese pharmaceutical markets in 2006, according to the company.

For Ranbaxy, the deal facilitates its strategy of building a proprietary drug portfolio, a strategy employed by several leading Indian companies to shift their product mix from highly cost-competitive generic drugs to more valued-added innovator products. “This is a significant milestone in our mission of becoming a research-based international pharmaceutical company,” said Malvinder Mohan Singh, CEO and managing director of Ranbaxy Laboratories.

Daiichi Sankyo was formed from the merger of Sankyo and Daiichi Pharmaceutical in 2005. This was a merger following a more traditional pattern of two Japanese-based pharmaceutical companies joining forces to build scale and critical mass, a route also seen in the merger of Mitsubishi Pharma and Tanabe Seiyaku in 2007 to form Mitsubishi Tanabe. But other Japanese pharmaceutical companies have been breaking the mold as well. Takeda Pharmaceutical acquired US-based Millennium Pharmaceuticals for $8.8 billion earlier this year, and Eisai completed its $3.9-billion acquisition of US-based MGI Pharma in early 2008.

Innovator pharmaceutical companies building portfolios in generics, cross-border mergers and acquisitions between India and Japan, and a projected monumental shift in pharmaceutical market growth. It is a brave new world for pharmaceuticals.