You'd be hard-pressed to find someone who's lost more during the recent upheaval in the generic drug business than Dilip Shanghvi: He forfeited $17 billion, plus the title of India's richest man.
After a four-year decline that erased 65 per cent from the value of Sun Pharmaceutical Industries Ltd., Shanghvi is preparing to bounce back. He's doing it by borrowing a page from Big Pharma's playbook: investing in higher-margin patented medicines rather than relying solely on copying drugs.
That won't be easy, especially when the multinationals that dominate the pharmaceutical business have already seen the payoffs from their massive research and development spending become more uncertain. Those giants are increasingly turning to acquisitions to fill out their pipelines, and that's where Shanghvi also sees an opening. Aided by an ability to move quickly because of Sun Pharma's relatively small size-it had only about $4 billion in sales in 2018, compared with Pfizer Inc.'s $53.6 billion-and streamlined decision-making, Shanghvi thinks the company can eventually pick up enough early-stage innovations and key personnel to generate half its revenue from patented medicines. "It does require some additional skills beyond what a typical generic has," Shanghvi says, but those skills aren't impossible to acquire.
Shanghvi says he and Sun have a better chance of success at new medicines than many US giants. For one, he's proved adept at dealmaking. Shanghvi recognised the opportunity in generic dermatology products at an early stage, acquiring a controlling stake in distressed Israeli drugmaker Taro Pharmaceutical Industries in 2010 and using price increases on its portfolio to help improve Sun's profitability. Sun today is India's largest drugmaker, thanks in part to the 2015 acquisition of a troubled local competitor, Ranbaxy Laboratories.
Shanghvi says the inspiration for his strategy is British drugmaker Shire Plc, which largely eschewed research and development in favor of a "search and development" model: acquiring and licensing products created by others. Shire was bought for $62 bn this year by Takeda Pharmaceutical Co. to bolster its own dwindling product pipeline.
Because he controls 55 per cent of Sun's shares, Shanghvi says, the company can pursue opportunities more nimbly than rivals. — Bloomberg
