Sun Pharma Enters China With Two Specialty Drugs

Two months after billionaire Dilip Shanghvi said Sun Pharmaceutical Industries Ltd. is looking for a partner in China to scale up its business, India’s largest drugmaker inked a pact with China Medical System Holdings for two specialty drugs.

Sun Pharma has signed a licensing agreement with China Medical System Holdings for development and commercialisation of Cyclosporine eye drops, according to an exchange filing, as the Shanghvi-promoted drugmaker looks to tap the dry eye market in Greater China—the world’s second-largest pharma market.

China Medical System, according to the pact, will pay Sun Pharma an initial upfront payment, regulatory and sales milestone payments, and royalties on net sales—the terms of which are confidential. The agreement is for 15 years from the first commercial sale, which may be extended by three years.

The Indian drugmaker also signed a deal with China Medical System for development and commercialisation of Tildrakizumab—used for treating psoriasis. The agreement and timeline for Tildrakizumab is same as the eye drops and the deal details are kept confidential.

While China appears to be a lucrative market for both Tildrakizumab and Cyclosporine as 6.5 million people suffer from psoriasis and psoriatic arthritis and 100 million from dry eye, according to HSBC, Sun Pharma will face higher competition for the drugs. “The drugmaker may need to do some additional bridging of clinical trials to support its application for regulatory approval in China,” Damayanti Kerai, analyst at the research firm, said in a note.

Agreed Prashant Nair, deputy head (India research) at Citi. Some China-specific clinical trials would be required, and the launch would be a few years away, he said.

Both Citi and HSBC, however, said it’s difficult to quantify the upside from commercialisation of the drugs at this stage.

Besides Sun Pharma, other Indian drugmakers such as Dr. Reddy’s Laboratories Ltd., Aurobindo Pharma Ltd., Natco Pharma Ltd. and Alembic Pharmaceuticals Ltd. are focusing on ramping up their presence in China.

That comes on the back of China’s new rules allowing to seek nod for launching the drugs approved by the U.S. Food and Drug Administration. The country is on a mission to drive down the cost of healthcare. It’s importing more medicines and speeding up approvals of new products to ensure they reach patients faster. Over the past one year, 11 provinces in China introduced the group purchasing organisations to buy generics in bulk at lower prices for state healthcare system.

China is undergoing market-friendly reforms, which will expedite generic approval timelines, according to Edelweiss. “Earlier, approval timelines in China were delayed. It would typically take seven to eight years for registration of new molecules with the Chinese FDA,” Deepak Malik, analyst at the brokerage, said.

HDFC Securities Ltd. analyst Amey Chalke had earlier told BloombergQuint that the Chinese hospital market is a big opportunity for Indian generics. “Before the reforms, it was the multinationals which had advantage but now the doors are open to Indian players as well,” he said.