Sun Pharma buys Novartis brands for Rs 1,900 cr

To acquire 14 Novartis drugs in Japan to boost presence in the country

Sun Pharmaceuticals, India's largest drug maker by sales, has acquired Novartis’ branded drug portfolio in Japan for $293 million (Rs 1,900 crore). With this, Sun will gain a strong foothold in Japan, the world's second largest drug market after the US.

The deal also marks Sun’s second association with Japan. It had acquired Ranbaxy Laboratories from Japan’s Daiichi Sankyo in 2014.

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According to the deal, a wholly-owned subsidiary of Sun Pharma will acquire 14 established prescription brands from Novartis for a cash consideration of $293 million. These brands have a combined annualised revenues of $160 million and address medical conditions across several therapeutic areas.

Novartis will continue to distribute these brands, for a certain period, pending transfer of all marketing authorisations to Sun Pharma’s subsidiary.

The acquired brands will be marketed by an established local marketing partner under the Sun Pharma label. The local partner will also be responsible for distribution of the brands, Sun Pharmaceuticals stated.

Commenting on the acquisition, Dilip Shanghvi, managing director of Sun Pharma, said, “Japan is a market of strategic interest for us. This acquisition marks Sun Pharma’s foray into the Japanese prescription market and provides us an opportunity to build a larger product portfolio in the future.”

According to December 2015 IMS Data, the size of the Japanese pharmaceutical market was estimated at $73 billion, accounting for seven per cent of the $1-trillion global pharmaceutical market.

Sun Pharmaceuticals, which has been facing regulatory heat over manufacturing practices at its key plants, has repeatedly expressed interest to expand its footprint globally.

Novartis, too, has been facing regulatory hurdles in Japan over delays in disclosing the side effects of its drugs. In February, Novartis unit in Japan faced a 15-day closure for compliance violations.

Sun has so far been unable to crack the Japanese market, while other Indian generic drug makers have established their presence in the country. Ranbaxy, which was acquired by Sun in 2014, had established a joint venture with a local company, Nippon Chemiphar, in 2005. Ranbaxy itself was acquired by Japanese company Daiichi Sankyo before being taken over by Sun.

Lupin acquired Kyowa Pharmaceuticals in Japan in 2007 and the market now contributes about 10 per cent of its revenue. In the same year, Zydus Cadila acquired Nippon Universal Pharmaceuticals in Japan, but Zydus announced exit from Japan last year.

LOOKING EAST

• Nearly $14-$16 bn worth of drugs are coming off patent in Japan over the next two years
   
• Move will help Sun Pharma diversify its geographic presence
   
• It’s focus on branded, higher-margin markets should get a boost
   
• Sun Pharma would want to use the opportunity to get a good deal given the regulatory issues Novartis has had to face