Sun Pharma plans buyouts in the US

Sun Pharmaceutical Industries has built a war chest of $450 million for acquisitions in the US, in a bid to develop its generic drugs business in the region.

Dilip Shanghvi, chairman and managing director, said, "We are focusing on acquisitions in the US as we want to become a more meaningful player in the $10 billion drug market. As a criterion for acquisition, we ideally look at 25 per cent return on capital employed within four to five years after providing for the synergies. Based on this, we might look at a single or multiple buyouts in the US."

Sun Pharma plans to increase its foreign sales contribution to the total business from 40 per cent to 50 per cent in two years.

Shanghvi said since the company did not have any debt other than the $300 million raised from foreign currency convertible bonds, the corpus for acquisitions could be increased over time.

The company has, however, not engaged any merchant banker for the exercise.

Sun Pharma has three plants in the US and one in India approved for supplying drugs to the US. The company would be increasing capacity for Caraco, a Detroit-based generic drug company it acquired in 1997, from 240 crore tablets a year to 300 crore. Caraco's revenues in the last financial year was $83 million, a growth rate of 29 per cent, said Shanghvi.

The company has 50 generic products in the pipeline awaiting approval from the US Food and Drug Administration. Among them is imatinib mesylate, the basic product that goes into the making of Gleevec, a branded drug from Novartis used in treatment of chronic myeloid leukemia.

Sun Pharma's formulation exports to 30 countries outside the US account for 8 per cent of the company's turnover. Shanghvi plans to increase this as well.

Besides the company wants to increase its share in the domestic drug market from 3.4 per cent to 4 per cent within two years.