Mumbai: Investors looking for a vehicle to ride the research skills of Indian chemists and pharmaceutical scientists will soon have an option. Sun Pharmaceuticals has decided to list its new drug research and development company, Sun Pharma Advanced Research Company (Sparc), by May this year.
The company will be the first specialist drug discovery company to be listed on the Indian stock exchanges. Every shareholder of Sun Pharma will be allotted a Sparc share for every share held in the parent. The Sun Pharma stock rose 1.76% on 15 March to close at Rs1,020 on the Bombay Stock Exchange (BSE).
Dilip Shanghvi, chairman and managing director, said that the company is currently awaiting approval from the courts, as mandated in Indian company rules, for the formal spin-off, which was first proposed six months ago.
Sparc will be listed on BSE and the National Stock Exchange, he said.
As per current plans, the equity structure of the new research company will be a mirror image of the parent. More than 30% of Sun Pharma is held by public shareholders, according to the company’s website.
Sparc has four new medicines and three technologies for drug delivery under development. The new drugs being developed include an anti-histamine (allergic cold) candidate, an asthma drug, a seizure and central nervous systems disorder drug and a muscle relaxant.
The new delivery devices under research include a dry powder inhaler for asthma patients, a controlled release system (which has a longer lasting effect) for treatment of gastric disorders and a nano-emulsion technology for targeted treatment in cancer patients.
The anti-histamine drug, which the company is researching currently, will enter large-scale human trials by 2008. The potential market for such drugs is worth $5.5 billion (Rs24,200 crore) globally. Its inhaler technology will hit the market this year, Shanghvi added.
He said the company anticipates an additional investment of up to $70 million for drug development in the next three years, which is expected to be raised by licensing out drugs and technologies to other companies.
Shanghvi said the company will receive such revenue flows over the next two years.
Sparc which employs about 150 scientists at present, plans to hire another 125 scientists over the next few years.
Sun’s decision to spin off the research company is aimed at mitigating the risks involved with drug development on the parent company’s balance sheet. “If there is further fund requirements for the research, the fund-raising also will also be easier for the new company as its R&D pipeline is pretty clear now for valuation,” says Rohit Bhat, director, B&K Securities.
Sun Pharma has become the most valuable drug maker in India, overtaking Cipla from the top spot at a time when shares of bigger rivals have taken a beating in the race for German drug maker Merck’s non-patented drugs business.
India’s second-largest drug maker Dr Reddy’s Laboratories had spun off its drug discovery activity into a separate company in September 2005 in partnership with two leading private equity companies.
It had raised investments totalling $52.5 million from Citigroup Venture and ICICI Ventures for the spun-off company christened Perlecan Pharma.