The next Infosys | Creating long-term value—Sun Pharmaceutical

It’s only 30 years on that Sun Pharma is hitting its stride, having become one of the world’s most profitable generic drug makers.

Sun Pharmaceutical Industries Ltd isn’t a new kid on the block. The company was founded in 1983 with a manufacturing plant in the small Gujarat port town of Vapi, a product line consisting of five therapies to treat psychiatric ailments and a marketing team consisting all of two people.

It’s only 30 years on that the firm is hitting its stride, having become one of the world’s most profitable generic drug makers—net profit for fiscal 2013 stood at Rs.516.55 crore—and India’s biggest pharma company by market value. At Rs.1,21,811 crore, as of 6 December, Sun Pharma’s market value is about three times that of Dr. Reddy’s Laboratories Ltd, the next most valuable Indian drug maker.

With $12.6 billion of personal wealth, founder and managing director Dilip Shanghvi, 58, is ranked the fifth richest person in India and 89th in the world as of 6 December, according to the Bloomberg Billionaires Index.

Investor confidence is clearly reflected in the stock movement. From 1 January 2013 to 1 January 2014, Sun Pharma rose 54.97%, more than twice the BSE Pharma Index’s 22.89% return. Back in 1994, when the firm went public, its initial public offering was oversubscribed 55 times.

The firm had Rs.6,327 crore cash in hand as of 30 September 2013, enough to sustain the spree of acquisitions that has propelled its rapid growth in recent years.

“Sun has a strong foothold in both the domestic and overseas markets. It also has a war chest full of cash, which it is likely to use for further acquisitions both in India and overseas,” said Phani Sekhar, a pharmaceuticals analyst at Angel Broking Pvt. Ltd.

Sun Pharma made 13 acquisitions between the late 1990s and 2012, starting with the purchase in 1997 of Detroit-based Caraco Pharmaceutical Laboratories Ltd. That was a year in which it also bought stakes in two Indian pharma firms—Tamilnadu Dadha Pharmaceuticals Ltd and MJ Pharmaceuticals Ltd.

In 2010, it acquired a majority stake in Israel-based Taro Pharmaceutical Industries Ltd, a move that more than doubled its revenue in the US to $1.1 billion from $484 million. Within two years, Sun Pharma bought two more firms in the US—Dusa Pharmaceuticals Inc.and the generic business of URL Pharma Inc.

“As far as geographical expansion is concerned, we think there is a great deal of scope for growth in the US as well as emerging markets,” said Uday Baldota, senior vice-president (finance and accounts) at Sun Pharma. The US generic market is about $70 billion, where our size is just about $1.5 billion. We would also like to build our presence in Europe and Japan.”

Global acquisitions will continue to boost the overseas revenue of Sun, analysts said.

“We believe the US will continue to be the core earnings driver for Sun Pharma, with support from India and rest of the world. We estimate 22% compounded annual growth rate in core earnings per share over FY13-15,” according to the annual report on Sun Pharma by Motilal Oswal Research dated 12 September 2013.

Apart from India and the US, Sun has manufacturing facilities in Israel, Mexico, Hungary, Canada, Bangladesh and Brazil. In India, the firm has 10 manufacturing facilities spread across Gujarat, Jammu and Kashmir, Sikkim, Tamil Nadu, Maharashtra and Dadra and Nagar Haveli. Sun has eight plants in the US.

Sun Pharma has so far escaped the kind of troubles that rival Indian generic drug makers such as Ranbaxy Laboratories Ltd have had with the US drug regulator Food and Drug Administration, or FDA.

In May 2013, Ranbaxy pleaded guilty to US felony charges of selling adulterated antibiotic, epilepsy and other drugs from its Dewas (Madhya Pradesh) and Paonta Sahib (Himachal Pradesh) plants—which are still unable to supply the US market—and paid a record $500 million fine.

Again in September, FDA banned imports from Ranbaxy’s Mohali plant in Punjab. In June, the European Union also fined Ranbaxy for blocking supply of cheaper anti-depressant drugs in the market.

Sun Pharma, however, received a total of 20 Abbreviated New Drug Application (ANDA) approvals, including that for Doxorubicin Liposomal injection, a sought-after cancer-fighting medication. ANDA is an application for US generic drug approval for an existing licensed medication.

The approval for Doxorubicin is likely to benefit Sun Pharma significantly in the US considering that Janssen Pharmaceuticals Inc. (a division of Johnson and Johnson), which has a 50% share of the market for the cancer fighting drug, announced a shortage of the drug in September.

FDA gave clearance to Caraco for manufacturing three products after an inspection of its facilities and confirmed that the company is in compliance with its manufacturing good practices requirements.

Sun Pharma may also benefit from the expiry of patents on several drugs. The global generics market will grow to $430 billion in 2016, up from $242 billion in 2011, as many brand-name drugs lose their patent protections, according to a recent report from Dolat Capital, a Mumbai-based investment management and financial advisory company.

The report said $100 billion worth of drugs are expected to go off patent over the next five years. “In 2011, only 25% of global spending on drugs was for generics. In 2016, generics’ market share will increase to 35% and Indian generic firms are gearing up for this opportunity,” it said.

“Expiry of patents will leave a lot of scope for generic drug makers in the US. Also, under the Obamacare programme for affordable health, the US administration is likely to procure cheap drugs from generic pharma companies,” said Sekhar of Angel Broking.

Sekhar also said that while the Patient Protection and Affordable Care Act of the US, popularly called Obamacare after President Barack Obama, will exert downward pressure on generic drug prices, a weaker rupee and higher sales will make up for any price reductions.

Founder Shanghvi, known as Dilipbhai to close friends, started the firm by selling Lithosun to cure bipolar disorder. Even today, pyschiatric therapies dominate the product portfolio of Sun Pharma, followed by cardiology.

Sun Pharma also has a strong mix of drugs across niche therapies, including neurology, nephrology, gastroenterology, orthopedics and ophthalmology.

The firm also separated its research business into a separate unit in 2007—Sun Pharma Advanced Research Co—to provide more focus on research and development and for spreading the business risk.

“Sun Pharma’s focus has been to build a business where you create long-term value, a business which is sustainable and predictable. We have been using different strategies in different markets to achieve this objective,” Baldota explained.

“In India, we selected chronic ailments or therapies as a focus area. Drugs for chronic ailment have a long prescription life. We started with psychiatry when we began and then added other chronic areas like cardiology, diabetic and neurology among others . This helped us in building business that offers a sustainable revenue stream.”

“In the US in addition to plain generics we focused on complex products, or on products where we had technology advantage.”

The firm, however, has faced a few setbacks as well. For instance, its plan to acquire a 100% stake in Taro did not succeed.

Sun Pharma acquired a 66% stake in Taro in 2007 for $450 million, but got control of the company only in 2010 after a legal battle with the promoters, the Leavitt family. It offered to buy the balance 34% stake as well, but decided to drop the plan when some hedge fund investors did not agree with the valuations. “This is not a very big drawback. The only impact it may have is that Sun’s revenues may not grow as per their expectations,” Sekhar said.

India's Rising Sun Pharma Makes Dilip Shanghvi Country's Fourth Richest

India’s economy may have faltered but one sector that seems to be thriving is pharmaceuticals. Shares of the country’s generics champs have done well (with exceptions such as the scandal-hit Ranbaxy Laboratories) and none more so than the Bombay Stock Exchange-listed Sun Pharmaceuticals, India’s most valuable drugmaker.

This week, shares of Sun hit a peak on speculation of an imminent deal. It was reported that cash-rich Sun is looking to buy German generics firm Stada, though both parties were quick to issue statements saying they had no comments to make on “market conjecture”. 

The company’s quarterly results Tuesday when it simultaneously announced a 1:1 bonus issue of shares, added to the buzz. Sun reported close to a 24% rise in net profits to $180 million on a 32% jump in sales to $547 million, beating market estimates.  For the fiscal year ending March 2013, the company’s sales crossed $2 billion for the first time.

Even Sun’s usually reticent founder Dilip Shanghvi was compelled to express himself in a press statement: “While it took us almost 27 years to record $1 billion in revenues, the next billion was added in just 3 years.” He also added that Sun was focused on enhancing its international presence which suggests that a deal could indeed be in the offing.

 Sun, which gets 70% of its revenues from overseas, thanks partly to a few strategic acquisitions, has been rising at a scorching pace. The stock has gained over 90% in the past year, outperforming the Sensex’s 22% rise over the same period. The company’s market cap of  close to $20 billion now exceeds the combined market cap of three of its rivals owned by billionaires-Yusuf Hamied’s Cipla Pharmaceuticals, Desh Bandhu Gupta’ Lupin Laboratories and the late Anji Reddy’s Dr Reddy’s Laboratories.

Shanghvi, who founded Sun 30 years ago as a maker of psychiatric drugs, is now India’s fourth richest person with a fortune close to $12 billion.  In 2012, he had entered the top 5 ranks for the first time. This week he overtakes construction magnate Pallonji Mistry to claim the fourth spot.  If Sun continues to shine, he could likely climb into third place, knocking off tech titan Azim Premji.

Top 12 Leadership Traits You Need to Thrive in Tough Times

Trying to grow your business in this sluggish economy is a little like trying to swim through Jell-O. Ineffective or uncertain leaders definitely need not apply.

So what does it take to lead a small business through this ongoing economic mess? The blogosphere is humming with ideas lately. Here's a roundup of the important traits for entrepreneurs in 2012:

1. Listen. Tune in to what workers and customers are saying, and you'll find great ideas for how to move forward.

2. Give credit. Workers love leaders who acknowledge their ideas.

3. Be yourself. In our age of sound bites and phony smiles, tell your story honestly. It's rare and refreshing, and makes workers feel like they know you -- and want to help you succeed.

4. Communicate. So much company dysfunction can be prevented with clear communication. Otherwise, workers are in the dark. And soon, they won't care.

5. Don't be trendy. Avoid the "strategy du jour" problem. Choose a course and stick to it.

6. Beat anxiety. Stop worrying and turn your negative emotions -- regret, fear, sadness -- into teachers that help shape your character.

7. Be service-oriented. Leaders can be sort of self-involved, forgetting that they are in a position of leadership. To serve customers, shareholders and workers stay focused on others.

8. Be accountable. Define the results you want, and acknowledge when a screw-up is your fault.

9. Use empathy. Demographic changes have foisted more and more women into the workplace. Make sure your communication and leadership style is a fit for today's workforce.

10. Share the big picture. If your workers don't know the company's overall goals, it can be hard for them to solve problems. That leaves you having to micromanage every problem instead of being able to delegate and offer guidance.

11. Keep your cool. The days when being a screamer worked are long gone. If workers are worried about whether you're in a good mood today or not, little gets done.

12. Think like an immigrant. When you arrive on new shores, you often see the business world with fresh eyes. Use your unique perspective to spot opportunities others are missing.

Top 5 Tools for Social Entrepreneurs

Social entrepreneurs use business ventures as a means to solve the world’s most complex problems.

These days, a growing number of social entrepreneurs are building for-profit business models, bypassing government association and the confining structure of the nonprofit classification. In a number of states, including California and New York, entrepreneurs can now form so-called B Corporations, which allow company directors to weigh social missions over financial returns.

As a result, more tools are popping up to aid the socially conscious business owner. Here are five resources designed to help do-good entrepreneurs get their enterprises off the ground and into the black.

1. B Lab’s “Impact Assessment Tool”

The nonprofit B Lab, founded in 2009, provides a host of information on its site and certifies companies as B Corps for an annual fee (the amount varies, based on a company’s revenue). Its free Impact Assessment Tool helps companies assess their social or environmental impact and improve their performance, regardless of whether they ultimately seek certification. Examples of completed B-Reports are accessible on B Labs’s site to help guide you in the creation of your own socially sustainable business. To date, there are 488 certified B Corps in existence.

2. Ashoka.org

Ashoka, founded in 1980, strives to make social entrepreneurs competitive in the global marketplace by granting fellowships to business leaders focused on social and environmental progress. Ashoka Fellows receive a living stipend, allowing them to work full time on their social enterprise. In recent years, Ashoka’s budget has grown to $30 million, and the nonprofit has granted more than 2,000 fellowships. Along with its active work, Ashoka’s site supplies free information and aggregates media from blogs to radio feeds.

3. New York University’s speaker series

NYU’s Catherine B. Reynolds Speaker Series focuses specifically on social entrepreneurs, and hosts some of the most successful public and private sector “change-makers” from around the world. If you’re in the New York City area, the series is free and open to the public; if you’re not able to make the event in person, past series are accessible via video download on iTunes free of charge. Past speakers include Seth Goldman of Honest Tea, John Mackey of Whole Foods Market, and acclaimed writer and Nobel laureate Elie Wiesel, representing the Elie Wiesel Foundation for Humanity. A number of universities host similar programs for entrepreneurs, including Northeastern, Cornell, and Stanford universities.

4. Skoll Foundation’s SocialEdge.org

The Social Edge, founded in 2003, is a global online community for social entrepreneurs and is sponsored by the Skoll Foundation, which invests in social entrepreneurs. The site is an information hub featuring live discussions, blogs, forums, job listings, expert advice and other resources helpful to social entrepreneurs in all stages of development. For those ready to take their social enterprise to the next level visit the site’s “opportunities” section for information on fellowships, competitions and incubation programs.

5. UnreasonableInstitute.org

The Unreasonable Institute, founded in 2009, partners with more than 20 impact-investment funds and foundations. The institute picks 25 entrepreneurs through a rigorous screening progress and puts them through a six-week training and mentoring program, designed to take their ideas from the concept phase to operation. Check the Institute’s site for “Unreasonable.TV,” currently in its second season, which follows participants as they develop their social enterprises. There’s also a video interview section, profiling experts in the social business world, including Hewlett-Packard’s Phil McKinney, social venture capital firm Ennovent's Charly Kleissner and investment firm Good Capital’s Jane Anderson.

Five Tools for Naming a StartUp

Think about it: Most customers will hear your business name before they know anything about your products or services.

Like all first impressions, you only get one, so you better make it count.

Leonard Green, professor of entrepreneurship at Babson College, suggests that a name be quick, unique and easy to remember. “You have 10, 15, 20 seconds to catch people’s attention,” he says. “Just get in there and do things differently than what everybody else is trying to do, because that’s where the home runs come from.”

That sounds simple, but the job of naming a business can be complicated. While there’s no formula to follow, here are five tools that can ease the creative process.

1. Google 

If you aren’t familiar with the acronym G.I.A. (“Google It Already”), you should commit it to memory. The search-engine behemoth has a number of applications that are perfect to kick off your startup name search. Google Adwords’ Keyword Tool provides detailed information about the popularity of certain words and terms, including specific traffic numbers associated with them. Google also provides a patent search function that searches the entire U.S. patent database.Google Trends allows you to search through current and past search trends, so you can see when and why people have searched for your proposed business name. Most importantly, Google as a whole is a tool that gives you a macro view of the words and images associated with your idea. See what happens when you run your proposed business name through Google images, videos and even its translator.

2. Free worksheets

The Internet is a penny pinchers’ nirvana. You can find plenty of branding companies willing to dish out a little free advice for the opportunity to serve your company in the future. Companies like Wow Branding, Brandings and Brands For The People offer worksheets and e-books aimed at helping you brainstorm, focus your ideas and create a stellar brand name.

3. Your community

After you have come up with some ideas, turn to those you trust. Your friends and family make a great initial test group. Organize your potential ideas, present the concept and create a survey to keep the resulting feedback organized. Andy Smith, principal of Vonavona Ventures, an early stage enterprise consulting group and co-author of The Dragon Fly Effect, a book about brands, advises against long surveys that will turn off friends. “Make it focused and ask the bare minimum number of questions,” he says. “Take the extra step to make it interesting and fun somehow.”Pop Survey and Survey Monkey are two free websites where you can easily create your own professional online surveys.

4. NameChk.com, Domain Registries

Once you have narrowed the field to a few potential names, it’s time to start researching availability. NameChk.com is a tool that can save hours of research time. Just plug in some potential names into the search box and it will simultaneous check almost 100 different online networks and communities, giving you instant feedback on username availability. You might even find a few helpful networks you’ve never heard of before. Also check domain registries, such asGo Daddy, Register.com and DomainRegistry.com, that will allow you to check availability and secure your URL.

5. The Government

One of the last steps in the naming process is making your entity official. Searching the U.S. Patent and Trademark Office database will reveal if your name is already in use (something you should have already Googled, remember?). If there’s a similar name registered, information will be available regarding what products it’s associated with, and if the company holding ownership is still active. Make sure to follow the trademark process outlined on the USPTO website and consider legal counsel before submitting an application. The cost associated with filing an online trademark application varies depending on the class of product, but generally falls in the $275 to $325 range.