 "Sun Pharma Set To Tap Japan's Growing Focus On Generic Drugs")
Sun Pharmaceuticals is expected to gain from a growing focus on generic drugs in Japan.
India’s largest drugmaker by sales announced a deal to acquire Novartis’ branded drug portfolio in Japan for $293 million (Rs 1,900 crore) on Tuesday.
The drugs have a combined revenue of $160 million (about Rs 1,000 crore), less than five per cent of Sun Pharma’s consolidated annual sales of over Rs 27,000 crore. About half of Sun Pharma’s revenue comes from the US, but sales in that country have declined over the last few quarters because of regulatory issues at its plants. The potential in Japan is enormous and the increasing reliance on generic drugs in that country offers Sun Pharma an opportunity to expand. High quality was a prerequisite for success in the Japanese market, industry watchers said.
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Traditionally a market for innovator and branded products, Japan is seeing a shift towards generics as its government tries to cut its social welfare spending.
“Generics account for about 50 per cent of the total drug sales in Japan and the government would like to see it increase to 80 per cent over the next few years. This bodes well for generic drug makers like Sun Pharma,” said Sanjit Singh Lamba, managing director of Japanese drugmaker Eisai's India unit. The Japanese government's push towards generic drugs is coupled with price cuts in off-patent drugs. “Traditionally the price difference between an off-patent drug and its generic equivalent in Japan has not been significant, but that is now changing with rules to cap the price of off-patent drugs,” he added. However, analysts had a different perspective on the deal.
‘’The Japanese market is not very attractive in terms of growth and profitability. However, given Sun Pharma’s revenues are already at $4-4.5 billion, Japan becomes an important market to be present in,’’ said analysts from Credit Suisse in their note to investors.
Sun Pharma did not share details of its plans except stating that the acquisition provided it an opportunity to build a larger product portfolio.
“Sun Pharma always wanted to expand its footprint in the global market. This acquisition is a part of that strategy,” said a consultant who did not wish to be named.
The changes in market dynamics in Japan is also leading to a realignment and last December Japan's biggest drug maker Takeda tied up with Israel's Teva Pharmaceuticals, the world's largest generic drug maker, to sell generic and off-patent medicines.
Among Indian drug companies only Lupin has a foothold in Japan. Ranbaxy, which was acquired by Sun Pharma in 2014, had established a joint venture with Nippon Chemiphar in 2005. Ranbaxy itself was acquired by Daiichi Sankyo before being taken over by Sun Pharma.
Lupin acquired Kyowa Pharmaceuticals in Japan in 2007 and Irom Pharmaceuticals in 2011 and the country contributes about 10 per cent of its revenue. Lupin is setting up a new plant in Japan and is expanding its Goa plant to cater to that market.
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Novartis deal gives Sun Pharma a launch pad to enter Japan
