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Sun Pharma In The News

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Sun Pharma to grow emerging market pie, cut US dependence


The firm is looking at Brazil, Russia, Mexico
For Sun Pharmaceutical Indus'tries, the US is no longer the only land with the Midas touch.
The firm, which has had a strong focus on US since a long time, is now increasingly look'ing at markets including Brazil, Mexico, Russia and South Africa.
According to a spokesperson, Sun's business in these markets has grown at a compounded an'nual rate of about 40 % for close to a decade now.
In an earlier interview, Sun CEO Kal Sundaram had said markets like Brazil, Russia, Mexico and South Africa will form the crucible of the firm's emerging markets strategy, while the company would also look at increasing focus in countries like Venezuela, Viet'nam and Algeria.
Presently, apart from India, the US is a key geography for Sun, with about 30% of the RS 5,721 crore firm's revenues coming from that country.
Emerging markets currently contribute to 10% of the firm's topline, according to the spokesperson.
Industry experts also say no company planning to grow in'ternationally can ignore emerg'ing markets.
According to an analyst from a brokerage in Mumbai, unlike the US and EU, which are grow'ing in single digit ranging be'tween 4% and 6%, emerging markets like Russia, Brazil, etc are growing at over 20% per year on account of factors in'cluding rising disposable in'come levels and focus on lifestyle disorders.
Moreover, margins in emerg'ing markets are mostly in ex'cess of 20% due to the branded generics nature of the business there and the mostly out-of-pocket spending on healthcare, said Bhavin Shah, analyst, Dolat Capital Market.
According to Pricewater-houseCoopers, by 2020 when global pharmaceutical sales would touch about $1.3 trillion, a fifth would come from coun'tries such as Brazil, Russia, In'dia, China, Mexico, Indonesia and Turkey.
In 2008, when global sales were around $773 billion, about 12% was coming from the emerging countries.
"So if a firm is looking for a diversified portfolio, then emerging markets have to be'come a core focus area. US will remain, but it alone cannot as'sure stupendous growth," said the analyst.
Moreover, to grow rapidly in the emerging or 'pharmerging' markets, Sun would also look for acquisitions, said the spokesperson, though not spec'ifying the exact nature of the buys.
However, experts say in emerging markets drugmakers should mainly be looking at partnerships, joint ventures as well as distribution and mar'keting alliances with local partners for selling their prod'ucts.
Kislay Kanth, head of re'search, MAPE Securities, said Brazil, Indonesia, Turkey, etc are majorly consumers rather than producers of drugs with very limited production capac'ities.
"So Indian firms can mainly look at manufacturing within India and then selling in those markets through distribution channels. They might create their own marketing presence or acquire local firms which have strong distribution and marketing muscle," said Kanth.
The analyst from the broker'age said outright buys of local distribution or marketing com'panies is a time-consuming proposition, so Indian firms should mostly look for more of organic growth, coupled with selective acquisitions.