Sun Pharma looks beyond generics at experimental drugs

Sun Pharma looks beyond generics at experimental drugs

Sun Pharmaceutical Industries Ltd., India's largest domestic drug maker by market capitalisation, plans to invest more than $280 million in the experimental psoriasis drug that it in-licensed from US-based Merck Sharp& Dohme (MSD) last month and hopes to commercialise globally by 2018, said industry consultants with direct knowledge of the matter.

This is part of Sun's attempt to invest in a basket of promising innovative products in select therapies to grow beyond generics and add new revenue streams, they said. Sun is the first Indian drug firm to adopt this strategy of inlicensing experimental drugs at a late trial stage for commercialisation. In-licensing involves drug makers tying up with each other to cooperate on various aspects of development and marketing.

This sum cited above includes over $200 million that it may spend in Phase III clinical trials and the $80 million that it has committed upfront to in-license the drug but excludes what it may owe to MSD as royalties on achieving milestones related to regulatory approvals and sales.

"This is part of Sun's broader strategy to move beyond generics post 2018 and the company is hunting for more such lucrative branded experimental drug opportunities in select therapies such as CNS (central nervous system), cardiovascular, diabetes, allergy, oncology, ophthalmology and gynecology besides the derma segment," said one of the consultants cited above. He added that this is one way Sun is trying to address a key investor concern on how the company can boost the already high market capitalization that it commands today. A Sun spokesperson refused to comment on the matter.

Industry experts said that Sun is scripting a shift in strategy for Indian generic companies, which have typically out-licensed drug candidates at an early development stage.

"Acquiring an R&D asset for clinical development is a bold move. Hitherto, all Indian companies would look to license out their R&D pipeline. These companies were comfortable becoming a licensor at an early stage of development," said Sanjiv Kaul, managing director, Chrys Capital, a private equity firm. Sun Pharma is reversing that process by becoming a licensee, he added.

Late-stage clinical trials require deep pockets and are fraught with risks of failure, among the main reasons why Indian firms have steered cleared of this path until now.

"Sun today finds itself at an inflection point where it has to change gears to accelerate into the next orbit. It is moving up the pharma value curve and in the process has paved the way for other cash-rich large pharma companies in India to follow," Kaul said. Sun's promoter Dilip Shanghvi has placed unorthodox bets in the past and is doing that once again, said other industry veterans.

"Shanghvi had thought out of box by focusing on chronic drugs in the Indian market when all his Indian peers including Ranbaxy (which Sun is in the process of acquiring) were concentrating on anti-infectives. That strategy paid off. Today, in another smart move, he is betting on novel drug candidates involving chemical synthesis at a time when all other Indian players are going gungho about biosimilars," said Ramesh Adige, an industry expert and a former executive director with Ranbaxy. DS Brar of Ranbaxy and the late Anji Reddy of Dr Reddy's were very keen to do in the late nineties what Shanghvi has ultimately done, Kaul said.

"This boldness comes with success and a cash-rich balance sheet. I hope it is not an isolated case. One needs to have three-four shots at the goalpost for one goal to happen," he added in response to ET's query on Sun looking out for other similar opportunities.