Home » Business » China’s war on healthcare costs lures Sun Pharma to scale up business

China’s war on healthcare costs lures Sun Pharma to scale up business

There is a big opportunity for us, Shanghvi said.

Sun Pharmaceutical Industries is scouting for a partner in China to help it win a larger piece of the worlds second-largest drug market, where the government is on a mission to drive down healthcare costs.

With recovery underway in its U.S. business, Sun Pharma’s billionaire founder Dilip Shanghvi is honing in on China and believes market watchers are underestimating the potential there for India’s largest drugmaker. There is a big opportunity for us, Shanghvi said in an interview with Bloomberg in Mumbai on Thursday. That would create a significant new revenue stream, which is not factored in our valuation when analysts look at it.

China has rolled out an ambitious multi-city bulk procurement program that is driving down prices and providing an opening for Indian manufacturers like Sun Pharma to compete. Its importing more drugs, reimbursing more and speeding up approvals of new medicines to ensure they reach patients faster.

The policy push comes as many generic drug makers are still reeling from a brutal price war in the worlds biggest drug market, the US. While Sun Pharma’s Indian rivals, like Dr. Reddys Laboratories and Cipla are already expanding in the Asian nation, Shanghvi has mostly kept mum about his plans there.

Scaling up

The Sun Pharma will start scaling up its China business in six to nine months, according to Shanghvi. The unit will contribute some percentage to Suns $4 billion of overall sales within three years from almost nothing right now, he added. The $160 billion Chinese drug market is now a focus for Indian generics as US-approved drugs are cleared faster, Jefferies analyst Piyush Nahar wrote in a February 27 note.

While the reforms make China an attractive market, ramp-up and profitability will have significant challenges, Nahar wrote. Unlike US distribution is important in China and will need a local partner and higher spend. Analysts are split on the prospects of Sun Pharma’s stock, which has lagged the rise in the S&P BSE Sensex this year. In the last four years, it has plummeted nearly 52 percent compared to the Sensexs 42 percent climb.

Sun Pharma’s large portfolio of US-approved products should help the drugmaker ramp up its China business with little investment, Shanghvi said. We see enormous interest in China for products that we have global rights for, Shanghvi said, adding that the company would be comfortable making significant financial commitments, in the Asian nation longer term.

[“source=thehindubusinessline”]

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