Why Sun Pharma sold some of

its Profit making Business to

others
[ROLE OF COMPETITION COMMISSION OF INDIA]
Sonit Kumar.

Reg :1107475 | [MGN 601] | November 2, 2015

Introduction: The case is about drug major Sun Pharma, wanted to acquire USbased Insite vision eyecare firm to strengthen its ophthalmic segment portfolio. As
it was the key segment to make strong presence in US. Insite vision has developed
Durasite & Durasite 2, this drug is capable to extend drug retention duration. Based
on this technology Insite visions team has developed a drug which will BromSite
for treatment of inflammation and prevention of pain associated with cataract
surgery. For the 6-month period ended June, InSite Vision recorded revenues of
USD 3.8 million, an EBITDA loss of USD 6.4 million and a net loss of USD 7.5
million.[2]
Sun pharma also wanted to acquire GSKs(GlaxoSmithKline ) two plant which was
operating in opiate (a drug derived from or related to opium.), to strengthening its
active pharmaceutical ingredients (API) and analgesic drug segments. The Drug
opiates are primarily used for manufacturing pain killers.[1]
But CCI (competition commission of India) an obstacle in the path of Sun pharma
to acquire Insite vision. competition commission of India said that this acquisition
may kill the competition, as Sun pharma may form a monopoly. competition
commission of India asked to Sun Pharma to sell some of asset.

Company:After acquiring Ranbaxy from Diichi Sankyo , in 2014 Sun Pharma

became largest Pharma company in India, the largest Indian pharma company in the
US, and the 5th largest generic company globally. Firstly they have merged with
Daiichi Sankyo, later Daiichi Sankyo have sold its 8.9 % stake in $3.2 billion deal,
Daiichi Sankyo occurred a loss of $1. Billion, in 2008 as it had acquired Ranbaxy
in $4.2 billion deal[5]. But overall Daiichi Sankyo was able to pull out some profit
here because of value of yen has changed. In 2008, it was 90 per dollar when Daiichi
made the investment in Ranbaxy, when Daiichi has sold Ranbaxy to Sun Pharma it
was 120 per dollar.[3] In Sep 2015, Sun Pharma sold Ranbaxys two unit to Strides
arcolab, which was operating in Central Nervous System segment in a 165cr. deal.
In sep2015, Sun Pharma Acquired InSite Vision US-Based drug manufacture in
USD 48 million. Sun pharma has acquired GSKs(GlaxoSmithKline) two plat in
Australia. In feb2008 Promoter of Sun Pharma Dilip Shanghvi made a investment
of Rupee 1800cr in Suzlon energy. Dilip Shanghvi had said in an interview that our
intention is not to enter into this business, it just a financial investment.[4]

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Problem of case: Indian largest drug manufacture Sup Pharma wanted to acquire
InSite Vision eye care product manufacture to increase their market share in
ophthalmic segment in US market, Sun Pharma also wanted to acquire
GlaxoSmithKlines two plant in Australia, manufacture analgesic drug. its opiate
product portfolio along with inventory had to transferred to Sun Pharmaceuticals.
But Competition Commission of India came into the picture, competition
commission of India had said that if you want to acquire Insite Vision & GSK then
you have to sell some of your product to other company as it may form a monopoly,
which could kill the competition, same was happed, when Sun Pharma wanted to
Acquire Ranbaxy. Sun Pharma had to sold seven products from its portfolio to
emcure.

Management decided to sell Ranbaxys two unit, which was operating in Central
Nervous System to Stride Arcolab in 165 cr the deal also include transfer of its
employee to Strides. These two units have accounted Rupee 90 cr annual sale.Sun
pharma is the oldest player of CNS segment , Central Nervous system product has
sale of around rupee 1300cr[3]. Although both of the unit was not making any kind
of loss but Sun Pharma was very keen to buy GSK.It is a manufacture of active
pharmaceutical ingredients (API) and analgesic drug segments products , only 5%
revenue of Sun Pharma comes from active pharmaceutical ingredients segment,
more than 50 % of revenue comes from US market, where five company have
control over 60% of market share in API segment ,so this deal was very important
from the Sun Pharmas Business point of view ,because this deal could increase
market share in US market , this acquisition have also gave a specialized team to
Sun Pharma which will help in establish their business in API segment in US
market. In addition the share price raised by 3% after this deal .Sun pharma had also
acquired Insite Vision after this Share price of Sun Pharma registered a hike of
3%.[4]

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Conclusion: All the time it is not the same scenario, if a company is selling some of its businesses
to others that doesnt means company is not able to make profit out of it. In this case
as we have seen that Sun Pharma has seen a good opportunity to strengthen its active
pharmaceutical ingredients, which could help them to establish strong foot print in
US market. A market from Sun Pharmas 50 % revenue comes but still 5 other
company holding 60 % share in that market. Acquisition of GlaxoSmithKline was
able to provide some sort of opportunity to Sun Pharma, but COMPETION
COMMISSION OF INDIA came up with some condition, according to those
condition Sun Pharma had to sold some of its asset to other company. Sun pharma
had evaluated its each and every business portfolio, and based on that evaluation
they have decided to sell Central Nervous System business. At the time of
Ranbaxys acquisition Sun Pharma has done the same, it had sold seven products
from its portfolio to emcure. We can say that Sun pharma is more focusing on US
market, and it is obvious because 50% of revenue is coming from there only. In
India Sun pharma already at no. 1 position after acquiring Ranbaxy, Sun pharma
now more focusing on US market need .

References: 1. http://www.moneycontrol.com/news/business/sun-pharma-seals-dealto-acquire-us-based-insite-vision_3100241.html
2. http://www.business-standard.com/article/companies/sun-pharmacompletes-opiates-business-acquisition-in-australia115090100162_1.html
3. http://timesofindia.indiatimes.com/business/india-business/SunPharma-tanks-11-on-Daiichi-exit/articleshow/47007180.cms
4. http://in.reuters.com/article/2015/02/18/india-suzlon-energyidINKBN0LM0K520150218
5. http://in.reuters.com/article/2015/03/25/ranbaxy-lab-sun-pharmaidINKBN0ML0QF20150325
6. http://www.businesstoday.in/moneytoday/stocks/ranbaxy-acquisitiongood-for-sun-pharma-shareholders-experts/story/205526.html

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