BUSINESS Bloomberg Businessweek May 27, 2019
19THEBOTTOMLINE SunPharmaceuticalsfounderDilipShanghvi
sawhiswealthfallby$17billionaspricesforgenericdrugs
dropped.Sonowhe’sturningtopatenteddrugs.Generics makers, including Mylan NV and Teva
Pharmaceutical Industries Ltd., are following a
path similar to Sun’s. But Mylan’s investments in
patented products have contributed to a drag on
its profitability, and the Pennsylvania-based com-
pany is now conducting a strategic review of its
entire business, as it has no obvious successor on
the horizon for its blockbuster patented medical
device, the EpiPen. Meanwhile, sales of Teva’s
lone success in innovative drugs, the multiple
sclerosis treatment Copaxone, are dropping faster
than expected. The two branded medicines the
Israel-based company had been counting on to
replace Copaxone’s billions of dollars in annual
revenue produced only about $100 million in com-
bined sales last quarter.
Shanghvi says he and Sun have a better chance
of success. For one, he’s proved adept at deal-
making. Shanghvi recognized 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 strat-
egy 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 billion earlier this year by Japan’s
Takeda Pharmaceutical Co. to bolster its own
dwindling product pipeline.
Because he controls 55% of Sun’s shares,
Shanghvi says, the company can pursue oppor-
tunities more nimbly than rivals weighed down
by corporate bureaucracy. “The advantage is that
I have end-to-end understanding of all aspects
of the business,” he says. “It’s easier for me to
take decisions involving risk, because I am able
to assess risk from multiple dimensions. In a big
company they will need 8 or 10 people who have
to look at it.”
Investors are more skeptical. Sun’s shares have
fallen 6.8% over the past year, while India’s bench-
mark stock index has climbed 14%. The industry
price-fixing case is likely to add to the pressure.
More than a dozen top generic-drug makers,
including Sun, have been sued in U.S. federal courts
by more than 40 states, which accused them of
inflating prices of at least 100 different drugs. “We
believe the allegations made in these lawsuits are
without merit, and we will continue to vigorously
○ ShanghviEngland 4, Brexit 0
(With Foreign Help)
○ The finalists in Europe’s two top soccer tournaments are English.
The coaches and many players aren’tThree years after the U.K. voted to part with the
European Union over concerns about an influx of
newcomers, the nation’s soccer squads offer an
object lesson in the benefits of immigration: The
four finalists in the two top European club com-
petitions are English, but they’re all coached by
foreigners, and only one goal in the crunch games
that got them to the championship matches was
scored by a Brit.
When Brazilian striker Lucas Moura eliminated
Ajax with a shot into the bottom right corner sec-
onds before the final whistle in Amsterdam on
May 8, he ensured a place for Tottenham Hotspur
in the annual Champions League showpiece. A day
earlier, Liverpool overcame a three-goal deficit from
a previous match (each team hosts a game, anddefend against them,” a Sun spokesman says.
Many analysts are also doubtful about the com-
pany’s plans to move beyond generics. “It’s a dif-
ferent ballgame altogether,” says Surajit Pal, an
analyst with Prabhudas Lilladher Pvt. in Mumbai,
who has a reduce rating on Sun. “I don’t have any
data on any company, be it Indian or non-Indian
generic majors, who have made an impact out of
launching or selling new drugs.”
Shanghvi estimates that Sun has invested about
$1 billion in its patented-drug program so far. He
says growth in the Indian generics business, a
push into China, and new generic products in the
U.S. will generate cash that can be plowed into
reinventing the company. “The performance of
many large multinational Big Pharma companies
has been mixed,” says Shanghvi, whose personal
fortune now stands at about $7.8 billion, making
him India’s eighth-wealthiest person, according to
the Bloomberg Billionaires Index. “I think one can
learn from that.” —Ari Altstedter