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Pharma Firms Seek to List R&D Arms, but Funding Risks Remain (India)

This article was originally published in PharmAsia News

Executive Summary

A number of large Indian drug makers are preparing to list their research and development sectors as a separate unit on the India stock exchange. Both Nicolas Piramal India Ltd. And Ranbaxy Laboratories have been vocal about the likelihood of listed R&D units in their futures. This move may not be the best course of action, according to KPMG International's John Morris. In his opinion, the Indian stock market is not mature enough to provide companies with the $100 million to $200 million in funding they are going to need. According to KPMG estimates Indian drug companies will spend $500 million on research and development by 2010 and $1.2 billion by 2015. He says Indian companies looking to raise that kind of major cash should look to private equity investors. He suggests partnerships with funds in West Asia or Russia might be particularly profitable. Another option, according to Morris, is to partner with large international pharmaceutical companies. Whether he is correct remains to be seen. So far, Sun Pharma Advanced Research Ltd. is the only research unit posted on the Bombay Stock Exchange. Currently, the company is trading at Rs83.25, 4.48 percent below its initial public offering price. (Click here for more
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