Shares in Ranbaxy posted strong gains in Bombay today on reports that Pfizer, the US pharmaceuticals giant, is mulling a hostile counterbid for India's largest drug maker.

On Wednesday, Ranbaxy's controlling Singh family entered a "binding agreement" to sell its 34.8 per cent stake to Daiichi Sankyo, the Japanese pharmaceuticals company, in what was heralded as a landmark deal for both companies.

The purchase of the Singh's holding obliges Daiichi to make a tender offer for a further 20 per cent of Ranbaxy, that would hand control of the company to the Japanese group.

However, the Business Standard reported this morning that Pfizer's Indian unit may try to buy the 65.2 per cent of Ranbaxy not owned by the Singhs.

Ranbaxy's shares rose almost 4 per cent, at 564 rupees, during afternoon trade in Bombay. Pfizer's India unit gained as much as 17 per cent. In Tokyo, Daiichi fell more than 2 per cent.

A spokesman for Ranbaxy said: "The deal with Daiichi is binding and sealed." Pfizer and Daiichi declined to comment.

One Bombay-based banker said it was possible for Pfizer to launch a bid, but that wresting control of the company without the Singhs' approval would be difficult.

"The Singhs are so closely associated with the company and are staying on to manage it for Daiichi. It'd be ballsy of Pfizer to steam in on a done deal."

Daiichi agreed to buy the Singhs' stake at 737 rupees a share, a 31 per cent premium on Tuesday's closing price that values the Indian company at $8.5 billion.

A tie-up of Ranbaxy with either Daiichi or Pfizer would marry two classes of company that have traditionally been arch enemies.

Generic drugs makers profit by producing cheap copies of drugs invented by developers such as Daiichi. In recent years, Ranbaxy has been aggressive in challenging the patents that protect blockbuster medicines worth billions in annual revenues.

In particular, Ranbaxy has waged a costly legal battle with Pfizer in the US and Europe over the right to sell cheaper versions of blockbuster drugs led by cholesterol treatment Lipitor.

Takashi Shoda, president and chief executive of Daiichi Sanko, said the deal he had announced on Wednesday would "complement our strong presence in innovation with a new, strong presence in the fast-growing business of non-proprietary pharmaceuticals".

A merger of Daiichi and Ranbaxy, which would have a combined market value of about $30 billion (£15.4 billion), would marry Daiichi's research expertise with Ranbaxy's low-cost production plants and global distribution network.

Countries with ageing populations, such as Japan where generics account for just 5 per cent of the market, are expected to encourage the use of generic drugs in coming years to reduce healthcare costs.

As it is, proprietary medicines worth an estimated $50 billion are set to fall out of patent in the US alone by 2010.

Malvinder Mohan Singh, chief executive at Ranbaxy, had said that the sale of his family's stake to Daicchi would create "a new powerhouse … spanning the entire pharmaceutical spectrum."

Producing only generics, which typically sell at a 97 per cent discount to their patented templates, was not a sustainable business model, he said.

There have recently been signs that drug developers are becoming more inclined to cut deals with generics specialists – especially to harness low-cost production facilities.

In April, AstraZeneca settled a legal battle against Ranbaxy over the rights to produce Nexium, the ulcer pill that is the world's second-most lucrative prescription medicine. Ranbaxy dropped plans to manufacture an unauthorised copy; in return Astra agreed to outsource production of Nexium to Ranbaxy from May 2010.

Nexium accounted for sales of $5.2 billion last year, trailing only Pfizer's Lipitor, the cholesterol treatment that achieved revenues of about $12.7 billion.

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