China war on healthcare costs lure Indian drugmaker Sun Pharma: Report
New Delhi: Sun Pharmaceutical Industries Ltd. (Sun Pharma) is scouting for a partner in China to help it win a larger piece of the world's second-largest drug market, where the government is on a mission to drive down healthcare costs.
With recovery underway in its US business, Sun Pharma's billionaire founder Dilip Shanghvi is honing in on China and believes market watchers are underestimating the potential there for India's largest drugmaker.
The $160 billion Chinese drug market "is now a focus for Indian generics" as U.S.-approved drugs are cleared faster, Jefferies analyst Piyush Nahar wrote in a Feb. 27 note.
"While the reforms make China an attractive market, ramp-up and profitability will have significant challenges," Nahar wrote. "Unlike US, distribution is important in China and will need a local partner and higher spend."
Analysts are split on the prospects of Sun Pharma's stock, which has lagged the rise in the S&P BSE Sensex this year. In the last four years, it has plummeted nearly 52 per cent compared to the Sensex's 42 per cent climb.
Sun Pharma's large portfolio of US-approved products should help the drugmaker ramp up its China business with little investment, Shanghvi said.
"We see enormous interest in China for products that we have global rights for," Shanghvi said, adding that the company "would be comfortable making significant financial commitments," in the Asian nation long term.
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