Sun Pharma plans to buy innovative firms to generate revenue from patented drugs

By PharmaCompass

2019-05-30

Impressions: 69 Article

India’s largest drugmaker — Sun Pharmaceutical Industries Ltd — is drawing up an elaborate plan to bounce back. The company saw a 53 percent drop in its profits during the last quarter, following a corporate governance scandal in India. Since November 1, 2018, Sun Pharma has lost US$ 5.4 billion in market value.

Founder Dilip Shanghvi now wants to focus on early-stage innovations to generate half its revenue from patented drugs. Patented drugs come with higher-margins, as compared to generics. But getting into patented drugs is no mean task, as bigger players have been making massive investments in research and development. They have also been turning to acquisitions to enhance their pipeline.

Shanghvi too is looking at acquisitions to get into patented drugs, and reach his target of generating half of Sun Pharma’s revenues from patented drugs. In 2018, Sun Pharma’s revenues stood at US$ 4 billion. In contrast, the revenues of Pfizer stood at US$ 53.6 billion.

Shanghvi is taking inspiration for his strategy from British drugmaker Shire Plc, which was acquired by Japan’s Takeda Pharmaceutical for US$ 62 billion last year, that favored a “search and development” model of acquiring and licensing products created by others over the traditional research and development one.

Generics players like Mylan and Teva have also taken the acquisition route to increase their earnings from patented drugs. But Mylan’s investments in patented products have contributed to a drag on its profitability. Moreover, Mylan has no obvious successor on the horizon for its blockbuster EpiPen. In the case of Teva, sales of its multiple sclerosis treatment Copaxone are dropping faster than expected.

However, Shanghvi feels Sun can be more nimble at pursuing opportunities than companies like Mylan and Teva since he controls 55 percent of Sun’s shares, and the company won’t be weighed down by corporate bureaucracy.

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