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China's war on healthcare costs lures India's Sun Pharma
SUN Pharmaceutical Industries Ltd is scouting for a partner in China to help it win a larger piece of the world's second largest drug market, where the government is on a mission to drive down healthcare costs.
With recovery underway in its US business, Sun Pharma's billionaire founder Dilip Shanghvi is homing in on China and believes market watchers are underestimating the potential there for India's largest drugmaker.
"There is a big opportunity for us," Mr Shanghvi said in an interview with Bloomberg News 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 programme that's driving down prices and providing an opening for Indian manufacturers like Sun Pharma to compete. It's importing more drugs, reimbursing more and speeding up approvals of new medicines to ensure they reach patients faster.
India's top drugmaker will start scaling up its China business in six to nine months, according to Mr Shanghvi. The unit will contribute "some percentage" to Sun Pharma's US$4 billion of overall sales within three years from almost nothing right now, he added.
The US$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 Feb 27 note.
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 per cent compared to the Sensex's 42 per cent climb.
Sun Pharma's large portfolio of US-approved products should help the drugmaker ramp up its China business with little investment, Mr Shanghvi said. "We see enormous interest in China for products that we have global rights for," he said. BLOOMBERG