Sun Pharma looks to shine with tiny deals

Its subsidiary Taro's acquisition of Thallion Pharma is ninth acquisition since buying Ranbaxy

Sun Pharmaceutical’s subsidiary, Taro, made a tiny acquisition of Thallion Pharmaceuticals for $1.7 million in Canada on March 17. It was the ninth acquisition by Sun Pharma and its subsidiaries in the previous two years since it made a $4.2-billion big-bang acquisition of Ranbaxy Laboratories in 2015.

Till the acquisition of Ranbaxy, the company had made only seven acquisitions in 18 years, including Taro Pharma in Israel in 2010. The first was in 1997, when it acquired US-based Caraco for $37.5 million. This gave the Dilip Shanghvi-promoted company an entry into the lucrative US markets.

“With the Ranbaxy acquisition, Sun Pharma got a wide marketing platform,” says Ajay Garg, managing director, Equirus Capital, a home-grown investment banking firm advising on pharma mergers and acquisitions. “Following this, they have adopted a string of pearls strategy by largely acquiring specialty product companies which they can milk well across the marketing platform.”

Thallion Pharmaceuticals had a small turnover of $2.3 million in December 2016. "After acquisition, no turnover is expected of existing products as all the revenue-producing assets have been transferred from Thallion to the seller company, Bellus Health,” Sun Pharma informed the exchanges. “Taro Pharmaceuticals would have only the rights for development of orphan drug candidate, Shigamab.”

The drug targets E Coli-induced hemolytic-uremic syndrome. Sun’s objective to acquire this tiny orphan drug for development was to expand its innovative product development that are known as specialty drugs.

Sun Pharma made fortunes selling generic drugs in the US markets that are under pricing pressure due to increasing competition and regulatory pressure. 

This led to the company getting into specialty drugs that are innovative, to reduce competition and increase pricing power.

The company has also increased it research and development (R&D) spending to an estimated $410 million for 2016-17, or about 9 per cent of its revenue, so that it can develop such products. This is against $340 million, or about 8 per cent, of the revenue spent on R&D in 2015-16.

The spending is expected to rise further as the company acquires firms like Thallion to develop orphan drugs.