Mumbai: Merck and Co., the world’s second largest drug maker by sales, and Sun Pharmaceutical Industries Ltd, the country’s most valued pharma company, said on Monday they are forming a joint venture to develop and sell generic drugs in emerging markets, including India.
The deal underlines multinational drug companies’ increasing interest in emerging markets such as Asia Pacific, Latin America, Eastern Europe and Africa at a time when growth in developed countries, including the US and West European nations, has been shrinking.
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Sun and MSD Pharmaceuticals Pvt. Ltd, Merck’s Indian arm, did not disclose the financial details of the joint venture.
Mint had reported on Monday that the two companies are close to signing a marketing partnership for the domestic market.
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The joint venture, which is yet to be named, will leverage Sun’s strength in drug development, manufacturing and local marketing, as well as Merck’s expertise in clinical research, product registration and marketing, to tap emerging markets.
“Merck’s emerging markets strategy is driven by our focus on applying innovation across our business from introducing novel compounds to broadening its focus on innovative branded generics,” the company’s president for emerging markets Kevin Ali said at a media conference on Monday.
“By combining forces with Sun Pharma, we are complementing our innovative product portfolio with a solid foundation for addressing the diverse needs of patients, physicians and governments across the emerging markets.”
Sun’s chairman and managing director Dilip S. Shanghvi said Merck has an unrivalled reputation as a research-driven pharmaceutical company. “We are proud to be associated with them and look forward to working together.”
Sun will utilize the services of its research unit Sun Pharma Advanced Research Co. Ltd (SPARC) to develop novel generic drugs for the joint venture. The venture may also market existing products of these companies, depending on the demand in emerging markets.
A joint board and leadership team, comprising senior managers from both companies, will run the collaboration, said Adam Schechter, president, global human health, and executive vice-president, Merck and Co.
Emerging markets are expected to drive 90% of the world’s pharmaceutical growth.
The growing burden of chronic diseases such as cardiovascular ailments, diabetes and hepatitis, along with an increasing population and economic prosperity, is leading to an increased demand for new generic drugs in these countries.
Indian drug makers, who have a strong presence in the global generics market with the help of low-cost manufacturing capabilities, are ideal partners for large multinationals to tap the emerging markets.
Earlier, the world’s largest drug maker Pfizer Inc. and British drug maker Glaxo SmithKline Plc have also clinched generic drug development and supply deals with Indian companies such as Aurobindo Pharma Ltd, Claris Life Sciences Pvt. Ltd and Dr Reddy’s Laboratories Ltd.
“These collaborations could be a two-way arrangement, too, such as the local company making licensing in certain new drugs from multinationals, and MNCs (multinational corporations) signing co-marketing as well as generic drug supply deals with local players,” said Muralidharan Nair, leader, pharma and healthcare, at the consultancy Ernst and Young India.
India being a large and fast-growing emerging market itself, several country-specific partnerships have also been signed recently.
In January, German pharmaceutical company Bayer AG and Ahmedabad-based Cadila Healthcare said they were creating a joint venture company to tap the local market. India’s drug market, worth Rs 60,000 crore, is growing at 18-20% annually.
Stock analysts are not upbeat on the Merck-Sun deal.
“It’s a good opportunity for both the companies in a long term, but no immediate upside seems in the shares,” said Ranjit Kapadia, senior vice-president, institutional research, at brokerage HDFC Securities Ltd.
The Sun’s shares on Monday rose 2% to close at Rs 450.25 on the Bombay Stock Exchange, while the benchmark Sensex shed 1% to end at 19,262.54 points.
Graphic by Sandeep Bhatnagar/Mint