Sun Pharmaceutical Industries Ltd.

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Sun Pharmaceutical Industries Ltd.

Acme Plz.
Andheri-Kurla Rd., An
Mumbai 400 059
Telephone: 022 2821 1961
Fax: 022 2821 2010
Web site:

Public Company
Incorporateci: 1982
Sales: Rs 7.55 billion ($1.64 billion) (2002)
Stock Exchanges: OTC
Ticker Symbol: SPCE.F
NAIC: 325412 Pharmaceutical Preparation Manufacturing

Sun Pharmaceutical Industries Ltd. (Sun Pharma) is a rising star of Indias fast-growing Pharmaceuticals industry. In less than a decade, Sun has lifted itself into fifth position in the countrys Pharmaceuticals market. Sun manufactures a range of drugs for a range of medical specialties, treatments, and disorders. The company targets especially high-margin niche and specialty medications, including longtime bestseller Monotrate, as well as brands Celact (celecoxib), Oleanz (olanzapine), Rofact (rofecoxib), Nodict (naltrexone), Fexotrol (fexofenadine), Zelast (azolastine), and Ketorid (ketotifen). The company also produces a variety of specialty bulk actives and generic drugs. Sun Pharma manufactures and markets its drugs through a number of subsidiaries and divisions, including Aztec, Inca, Sun, Milmet, Synergy, TDPL, Symbiosis, and Solares. More than 70 percent of the companys sales come from within India. Sun is also present in the United States, through its control of publicly listed Caraco Pharmaceutical Laboratories, based in Detroit. The company continues to be led by founder, Chairman, and Managing Director Dilip S. Shanghvi.

Pharmaceutical Manufacturing Dream in the 1980s

While in college, Dilip Shanghvi had worked for his familys Calcutta-based wholesale drug trading business. Yet Shanghvis own ambitions turned toward the manufacturing and development of the pharmaceuticals themselves. Shanghvi founded his company, Sun Pharmaceutical, in 1982 with just $250, and began looking for a first product.

Shanghvi soon spotted an opportunity. Lithosan, a widely used drug for the treatment of manic depressive disorders, remained unavailable in Indias eastern provinces. Yet the drug was relatively easy to manufacture, and a friend of Shanghvi owned the equipment and a factory capable of producing it. In 1983, Shanghvi borrowed his friends equipment and Rs 10,000 from his father and Sun Pharmaceutical officially opened for business.

Suns sales were initially limited to the Calcutta market. The company quickly expanded its product line, boasting five products targeting the psychiatric segmentan area not subject to the Indian governments highly restrictive drug manufacturing laws. The psychiatric market also provided high margins on sales, a feature that was to mark much of the companys product choices over the following two decades.

By the end of its first year, Sun had moved into its own manufacturing facilityspending $50,000 to install its production into a self-described shed of 3,000 square feet in the town of Vapi, on the countrys west coast, near the pharmaceutical center of Mumbai (Bombay). Discussing the reason behind the move with Business World, Shanghvi explained: The industry was concentrated in the western region and it was easier to get permission there to launch new drugs.

The Vapi shed remained a central production plant for the company, expanding to match Suns rapid growth. By the end of its first year, the companys sales already topped Rs 750,000. Yet Sun continued to target its production to the Calcutta region and elsewhere along Indias east coast. In 1984, the company extended its marketing region to include most of the Indian eastern seaboard states.

Sun began locating and developing new drugs for its range, and began looking beyond the psychiatric segment in the mid-1980s. In the meantime, Sun moved to extend its marketing reach to Indias west coast as well. In support of that effort, Sun moved its administrative offices to Mumbai in 1986. The following year, the company extended its marketing reach throughout all of India.

Sun launched a new range of cardiology products in 1987, including Angizem and, especially, Monotrate. That drug became the companys first success and remained its leading product into the next century. The success of Monotrate also helped bring the company into the scope of the ORG (Operations Research Group) audit of retail pharmacy sales for the first time, with a rating of 107 and a 0.1 percent share of the Indian drug market.

Expansion in the 1990s

Sun Pharmaceutical added another new product area in 1989 when it began marketing gastroenterology products. That year also marked the debut of the companys export operations; initial foreign markets remained in the Asian region, however.

At the start of the 1990s, Sun stepped up its research and development operations as it sought to boost its position in the Indian pharmaceutical market. In 1991, the company began construction on its own research facility in Vadodara, which opened as the Sun Pharmaceutical Advanced Research Center (Sparc) in 1993. In that year, also, Sun began to market its drugs farther afield, opening offices in Moscow and in Toronto.

The year 1994 marked a turning point for the company. Sun went public that year, listing on several of Indias stock exchanges in an initial public offering (IPO) that was oversubscribed by some 55 times. The company also had placed one of its products among the top 250 pharmaceutical brands in India that year. Suns manufacturing base grew in 1994 with the opening of a new production plant, in Panoli, supporting its entry into the bulk actives market. Sun then opened a second facility, in Silvassa, for dosage form manufacturing, while the companys main Vapi plant underwent a new and large-scale expansion program.

In 1995, the company began developing a divisional operational structure, which already included Synergy, grouping its psychiatric and neurology products, created in 1994. The company now created the Aztec division for its cardiology products, and the Inca division for its line of critical care medication.

Sun itself, backed by its IPO, embarked on its own expansion drive in the mid-1990s. Acquisitions now formed a major part of the companys growth, starting with the purchase of Knoll Pharmas bulk actives manufacturing business based in Ahmednagar in 1996. In that year, also, Sun took a step to break into the important U.S. healthcare market, with its purchase of a controlling share of Detroit-based Caraco Pharmaceutical Laboratories, which specialized in the manufacture of generic dosage form medications and gave the company its first USFDA-approved production plant.

Also in 1996, Sun purchased a shareholding in Gujarat Lyka Organics, which, in addition to adding its production of cephalexin bulk active, brought Sun a USFDA-approved manufacturing facility. The company completed its acquisition of Gujurat in 1999.

In the meantime, its acquisition drive continued, bringing it a stake in MJ Pharmaceuticals Ltd., based in Halol. With a 60,000-square-foot, UKMCA-approved plant, MJ Pharma brought Sun its strong insulin production, as well as a springboard for entry into the European market.

Suns acquisition spurt had enabled it to boost its position to number 27 among Indias pharmaceutical companies by the end of 1996. Yet the company retained its appetite for growth, adding Tamil Nadu Dadha Pharmaceuticals (TND), based in Madras, the following year. That company brought Sun such new product areas as oncology, fertility, anesthesiology, and pain management. Following the TND purchase, Sun reorganized its operations, regrouping its businesses into six operating divisions.

Indian Top Five in the New Century

Sun opened a second research and development (R&D) facility in 1997, specializing in developing dosage forms and documentation for the fast-growing U.S. and European generic drugs markets. The following year the company expanded its line with the purchase of a number of brands from Natco Pharma, adding some Rs 500 million to its sales. The Natco brands gave the company new products in the gastroenterology, orthopedics, pediatrics, and other categories, as well as access to Natcos time-release technology. In 1998, also, Sun bought Milmet Labs, enabling the company to enter the ophthalmology products market for the first time. Meanwhile, the company added a new production plant in Silvas.

By 1999, Sun had jumped into the Indian pharmaceutical industrys top ten. The company also boasted six brands in the countrys top 300. Of importance, the company also had achieved leadership status in most of its specialty drug areas. By then, too, it had boosted its bulk actives business with the purchase of Madras-based Pradeep Drug Company Ltd. That company was merged into Sun itself in 2001. During that year, too, the companys Caraco subsidiary gained USFDA approval for a number of new generic drugs, as the U.S. market for generics was poised to boom in the early years of the new century.

Company Perspectives

In India, Sun Pharma intends to reach a top 3 ranking with specialists in all the therapy areas that it has a presence in.

In developing markets the company is creating speciality area product baskets that are customized to a countrys needs.

In the high value generic markets of North America and Europe, the company is working to develop and market speciality generics, with a clear plan of action to move on to supergenerics and differentiated generics.

The learning from international markets will equip the company eventually to launch innovative products across international markets of interest.

After selling off a number of tail end brands at the end of 2001, the company merged its MJ Pharmaceuticals subsidiary into its core operation at the beginning of 2002. The company also began submitting applications as part of its plan to enter the U.K. and German pharmaceutical markets. During that year, the company commissioned a new manufacturing facility, capable of producing some three billion tabs per year, in Dadra. That company also began construction on another plant, in Jammu, that year. As its Caraco subsidiary, which had been losing money since its acquisition, finally broke even that year, Sun Pharmaceutical itself cracked the India top five.

Sun, which had withdrawn its listing from a number of Indian stock exchanges during 2002, announced a stock split at the end of that year. At the same time, the company boosted its holding of Caraco to 65 percent in a stock-for-technology deal, which involved the transfer of some 25 off-patent drugs from Sun to Caraco, to boost its position in the U.S. generics market.

Meanwhile, Suns new product launches had become the companys primary motor for growth, representing half of its turnover from products less than four years old. While acquisitions accounted for a major portion of Suns growth since the late 1990s, in 2003 the company put its acquisition drive on holdat least temporarilyas it turned its focus toward its R&D and exports business. In support of these, the company expected to commission a third research and development facility in Baroda in September 2003, while planning began that year for a new product development laboratory, specifically created to support the companys exports to the United States and Europe, in Mumbai. Now one of Indias largest and most respected pharmaceutical companies, Sun prepared to take on the industrys global giants.

Principal Subsidiaries

Sun Pharma Global Inc.; Milmet Pharma Ltd.; Sun Pharmaceutical (Bangladesh) Ltd.; Zao Sun Pharma Ind-Russia; Sun Pharma Global Inc-BVI; Milmet Pharma; Caraco Pharmaceutical Laboratories Inc. (U.S.A.; 65%).

Principal Competitors

RPG Enterprises; GlaxoSmithKline Consumer Healthcare Ltd.; East India Pharmaceutical Works Ltd.; Dr. Reddys Laboratories Ltd.; Cipla Ltd.; Concept Pharmaceuticals Ltd.; Khandelwal Laboratories Ltd.; Dabur India Ltd.; Claris Lifesciences Ltd.; ICI India Ltd.

Key Dates

Dilip S. Shanghvi launches Sun Pharmaceutical in Calcutta.
With a loan of Rs 10,000, Sun Pharmaceutical begins manufacturing psychiatric drugs, then opens its manufacturing shed in Vapi.
The company moves its administrative and corporate headquarters to the West Coast and extends marketing coverage across all of India.
The company unveils its cardiology products line.
The company launches its gastroenterology products line and begins export operations.
The SPARC research and development facility is opened; offices in Moscow and Toronto are opened.
The company goes public on several Indian stock exchanges; it opens a bulk actives plant in Panoli and dosage form plant in Silvassa.
The company acquires Knoll Pharmas bulk actives division; it acquires stakes in Caraco (U.S.A.) and Gujarat Lyka Organics Ltd.; a stake in MJ Pharma also is acquired.
TDPL is acquired and the company reorganizes into six operating divisions.
The company acquires brands from Natco Pharma, including time-release technology.
The company acquires the Pradeep Drug company, based in the Madras region.
A new manufacturing plant opens in Dadra; the company boosts its stake in Caraco to 65 percent.

Further Reading

An Indian Chief, Chemical Week, December 23, 1998, p. 40.

Krishnan, Aparna, Sun Pharma to Focus on Exports, Hindu Businessline, May 12, 2003.

Phansalkar, S.J., Making Growth Happen: Learning from First-Generation Entrepreneurs, New Delhi: Response Books, 1999.

Prescription for Prosperity: Take the Long-Term View, Business World, April 7, 1999.

Sun Pharma Buoyed by Spurt in Caraco Sales, Hindu Businessline, January 17, 2002.

M. L. Cohen