Sun Pharma plans its biggest buy in US

Sun Pharmaceutical Industries, India’s largest drugmaker by market value, is planning its biggest acquisition in the US to boost sales in the world’s largest pharmaceutical market, Chairman Dilip Shanghvi said.

Sun, which made 13 purchases in the past 14 years, including the $454-million acquisition of a majority stake in Israel’s Taro Pharmaceuticals Inc, needs to buy a bigger US company to attain critical scale, Shanghvi said in an interview on January 21. Sun, which owns about 77 per cent of Detroit-based Caraco Pharmaceutical Laboratories Ltd, isn’t in takeover talks yet, he added.

“We are still a very small player in the US,” Shanghvi said.

“We will have to look at a slightly bigger acquisition rather than at very small acquisitions that we have done in the past.”

A buyout may help expand Sun’s capacity to sell generic medicines and enable the Mumbai-based company to gain control of manufacturing sites and sales networks, according to Shanghvi. Sun and Taro supplied less than 3 per cent of the generic medicines prescribed in the US in November, compared with Teva Pharmaceutical Industries Ltd’s 20 per cent share and Mylan Pharmaceuticals Inc’s 13 per cent share, Nomura Holdings Inc said in a report last month.

Sun rose 0.4 per cent to Rs 487.4 in Mumbai trading at 1.09 pm. The shares gained 70 per cent in the past 12 months, more than double the rise of the Bombay Stock Exchange’s 16-member healthcare index in the same period.

Shanghvi, however, didn’t specify how much Sun could spend on a US acquisition. Any target would need to have annual sales of more than $300 million for Sun to compete effectively with the top five generic drug makers in the US market, said Vikas Sonawale, a healthcare analyst with Religare Securities Ltd, Mumbai. “It will be a clear-cut shift in strategy,” Sonawale said. Such an acquisition may cost as much as $1 billion, and Sun may have to take on additional debt to finance it, he said. Sun reported total sales of $856 million in the year ended March 31.

Shanghvi, ranked 14th on Forbes’ list of the richest Indians, with a net worth of $5.2 billion, founded the company in 1983 and has followed a strategy of acquiring underperforming or loss-making companies and merging their operations into Sun.