PROJECT REPORT ON

Indian Pharmaceutical Industry Overview:

The Indian Pharmaceutical Industry today is in the front rank of India’s

science-based industries with wide ranging capabilities in the complex field
of drug manufacture and technology. A highly organized sector, the Indian
Pharma Industry is estimated to be worth $ 4.5 billion, growing at about 8 to
9 percent annually. It ranks very high in the third world, in terms of
technology, quality and range of medicines manufactured. From simple
headache pills to sophisticated antibiotics and complex cardiac compounds,
almost every type of medicine is now made indigenously.

Playing a key role in promoting and sustaining development in the vital field
of medicines, Indian Pharma Industry boasts of quality producers and
many units approved by regulatory authorities in USA and UK. International
companies associated with this sector have stimulated, assisted and
spearheaded this dynamic development in the past 53 years and helped to
put India on the pharmaceutical map of the world.

The Indian Pharmaceutical sector is highly fragmented with more than

20,000 registered units. It has expanded drastically in the last two decades.
The leading 250 pharmaceutical companies control 70% of the market with
market leader holding nearly 7% of the market share. It is an extremely
fragmented market with severe price competition and government price
control.

The pharmaceutical industry in India meets around 70% of the country's

demand for bulk drugs, drug intermediates, pharmaceutical formulations,
chemicals, tablets, capsules, orals and injectibles. There are about 250 large

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units and about 8000 Small Scale Units, which form the core of the
pharmaceutical industry in India (including 5 Central Public Sector Units).
These units produce the complete range of pharmaceutical formulations, i.e.,
medicines ready for consumption by patients and about 350 bulk drugs, i.e.,
chemicals having therapeutic value and used for production of
pharmaceutical formulations.

Following the de-licensing of the pharmaceutical industry, industrial licensing

for most of the drugs and pharmaceutical products has been done away
with. Manufacturers are free to produce any drug duly approved by the Drug
Control Authority. Technologically strong and totally self-reliant, the
pharmaceutical industry in India has low costs of production, low R&D costs,
innovative scientific manpower, strength of national laboratories and an
increasing balance of trade. The Pharmaceutical Industry, with its rich
scientific talents and research capabilities, supported by Intellectual Property
Protection regime is well set to take on the international market.

Environmental Analysis (PEST)

Technological advancements, tighter regulatory-compliance overheads, rafts

of patent expiries and volatile investor confidence have made the modern
pharmaceutical industry an increasingly tough and competitive environment.
Below is an analysis of the structure of the pharmaceutical industry using the
PEST (political, economic, social and technological) model.

Increasing Political Attention:

Over the years, the industry has witnessed increased political attention due
to the increased recognition of the economic importance of healthcare as a
component of social welfare. Political interest has also been generated
because of the increasing social and financial burden of healthcare.
Examples are the UK’s National Health Service debate and Medicare in the
US..

Economic Value Added:

In the decade to 2003 the pharmaceutical industry witnessed high value
mergers and acquisitions7. With a projected stock value growth rate of
10.5% (2003-2010) and Health Care growth rate of 12.5% (2003-2010), the
audited value of the global pharmaceutical market is estimated to reach a

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huge 500 billion dollars by 2004. Only information technology has a higher
expected growth rate of 12.6%. Majority of pharmaceutical sales originate in
the US, EU and Japanese markets. Nine geographic markets account for over
80% of global pharmaceutical sales these are, US, Japan, France, Germany,
UK, Italy, Canada, Brazil and Spain. Of these markets, the US is the fastest
growing market and since 1995 it has accounted for close to 60% of global
sales. In 2000 alone the US market grew by 16% to $133 billion dollars
making it a key strategic market for pharmaceuticals.

The Social Dimension:

Good health is an important personal and social requirement and the unique
role pharmaceutical firms play in meeting society’s need for popular
wellbeing cannot be underestimated. In recent times, the impact of various
global epidemics e.g. SARS, AIDS etc has also attracted popular and media
attention to the industry. The effect of the intense media and political
attention has resulted in increasing industry efforts to create and maintain
good government-industry-society communications.

Technological Advances:
Modern scientific and technological advances in science is forcing industry
players to adapt ever faster to the evolving environments in which they
participate. Scientific advancements have also increased the need for
increased spending on research and development in order to encourage
innovation.

Legal Environment:
The pharmaceutical industry is a highly regulated and compliance enforcing
industry. As a result there are immense legal, regulatory and compliance
overheads which the industry has to absorb. This tends to restrict it’s
dynamism but in recent years, government have begun to request industry
proposals on regulatory overheads to so as not to discourage innovation in
the face of mounting global challenges from external markets.

Company Profile
We are an international specialty pharma company, with a presence in 30
markets. We also make active pharmaceutical ingredients. In branded
markets, our products are prescribed in chronic therapy areas like
cardiology, psychiatry, neurology, gastroenterology, diabetology and
respiratory.

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We have the same drive for growth that marked our early days. Sun Pharma
came into existence as a startup with just 5 products in 1983. In the time
since, we have crossed several milestones to emerge as an important
specialty pharma company with technically complex products in global
markets, and a leading pharma company in India.

In India, We have reached leadership in each of the therapy areas that we

operate in, and are rated among the leading companies by key customers.
Strengthening market share and keeping this customer focus remains a high
priority area for the company.

In the post-1996 years, we have used a combination of internal growth and

acquisitions to drive growth; important mergers were those of the US, Detroit
based Caraco Pharm Labs, ICN Hungary (now called Alkaloida Chemical
Company Exclusive Group), and that of the internationally approved plants at
Halol, India as well as Bryan, Ohio, US and Cranbury, NJ, US.

We have shifted work related to new molecules and drug delivery systems to
a company, SPARC, which is listed on the Indian stock exchange.

BACKGROUND

Sun Pharma began in 1983 with just 5 products to treat psychiatry ailments.
Sales were initially limited to 2 states - West Bengal and Bihar. Sales were
rolled out nationally in 1985. Products that are used in cardiology were
introduced in 1987, and Monotrate, one of the first products launched at that
time has since become one of our largest selling products. Important
products in Cardiology were then added; several of these were introduced for
the first time in India.

Realizing the fact that research is a critical growth driver, they established
their research center SPARC in 1993 and this created a base of strong
product and process development skills.

Sun Pharma was listed on the main stock exchanges in India in 1994; and
the Rs. 55 crore issue of a Rs. 10 face value equity share at a premium of Rs.
140/- was oversubscribed 55 times. The minimum 25% that was required
under the regulations then for listing was offered to the public, the owner
family continues to hold a majority stake in Sun Pharma. We used this money
to build a greenfield site for API manufacture, as well as for acquisitions. For
the acquisitions, typically companies or assets that could be turned around
and brought on track were identified.

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Our first API manufacturing plant was built in Panoli in 1995, for access to
high quality actives ahead of competition, and to tap the vast international
opportunity for speciality APIs.

Another API plant, our Ahmednagar plant, was acquired from the
multinational Knoll Pharmaceuticals in 1996, and upgraded for approvals
from regulated markets, with substantial capacity addition over the years.
This was the first of several sensibly priced acquisitions, each of which would
bring important parts to the long-term strategy.

By 1997, our headquarters were shifted to Mumbai, the commercial capital

of the country. We began on the first of our international acquisitions with an
initial $7.5 million investment in Caraco Pharm Labs, Detroit. By 2000, we
had completed 8 acquisitions, each such move adding new therapy areas or
offering an entry to important international markets. A new research center
was set up in Mumbai for generic product development for the US market. In
India, as new therapy areas were entered into post acquisition; customer
attention, product selection and focused marketing helped us gain a foothold
in areas like orthopedics, gynecology, oncology, etc. From a ranking at 38th
in 1994, by 2000 we were ranked 5th with a leadership in 8 of the 11 therapy
areas that we are present in. The year 2000 was the year of turnaround at
the US subsidiary, Caraco, as it began to receive approvals after successful
inspection by the USFDA. In December 2004, a research center spread over
16 acres was inaugurated by the President of India, with special lab space for
drug discovery and innovation. The post 2005 years have witnessed
important acquisitions to strengthen our US business- the purchase of
manufacturing assets for controlled substances in Cranbury,NJ; that of a site
to make creams and lotions in Bryan, that of Alkaloida, a Hungary based API
and dosage form manufacturer , and recently, Chattem Ltd., a Tennessee-
based controlled substance API manufacturer.

The tally at the end of 2008:

17 manufacturing plants in 3 continents

8000 employees

2 World class research centers

Brand selling in markets worldwide

A growing presence in the US generic market

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 Increasing research investments

60% of sales from international markets

COMPANY PHYLOSOPHY

Sun Pharma's philosophy envisages working towards high levels of

transparency, accountability, consistent value systems, delegation across all
facets of its operations leading to sharply focused and operationally efficient
growth. The company tries to work by these principles in all its interactions
with stakeholders, including shareholders, employees, customers, suppliers
and statutory authorities. Sun Pharma is committed to learn and adopt the
best practices of corporate governance.

VISION

The Sun Pharma of tomorrow will have brands registered in major markets of
the world, and in most markets, promoted by a high quality field force. With
a strong network and established company equity, we would be an excellent
partner for a company seeking to license out products across markets.

MISSION

We are an international specialty pharma company, with a presence in 30

markets. We also make active pharmaceutical ingredients. In branded
markets, our products are prescribed in chronic therapy areas like
cardiology, psychiatry, neurology, gastroenterology, diabetology and
respiratory. In the time since, we have crossed several milestones to emerge
as an important specialty pharma company with technically complex
products in global markets, and a leading pharma company in India.

We are leader in each of the therapy areas that we operate in, and are rated
among the leading companies by key customers. Strengthening market
share and keeping this customer focus remains a high priority area for the
company.

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Control and evaluation

Audit Committee

The Board of the Company has constituted an Audit committee, which

comprises of three independent non-executive Directors viz. Keki M. Mistry,
S. Mohanchand Dadha and Hasmukh S. Shah. Keki M. Mistry is the Chairman
of the committee. The constitution of Audit Committee also meets with the
requirements under Section 292 A of the Companies Act, 1956. Kamlesh H.
Shah, the Company Secretary of the Company is the Secretary of the Audit
Committee.

The terms of reference stipulated by the Board to the Audit Committee cover
the matters specified under Clause 49 of the Listing Agreement as well as
Section 292 A Companies Act 1956.

Remuneration Committee

The company has not formed any Remuneration Committee of Directors. The
Wholetime Directors' remuneration is approved by the Board within the
overall limit fixed by the shareholders at their meetings. The payment of
remuneration by way of commission to the Participating Non-Executive
Directors (NEDs) of the company is within the total overall maximum limit of
half percent of net profits as worked under the provisions of Sections 349 &
350 of the Companies Act, 1956. This will be in addition to the sitting fees of
Rs. 5,000/- per meeting payable to the Non-Executive Directors. The actual
commission payable to the Non-Executive Directors of our company
severally and collectively is decided by the Board of Directors of the
Company within the overall limit fixed as above by Members of the
Company.

Shareholders / Investors Grievance Committee

The Board of the Company had constituted a Shareholders' / Investors'

Grievance Committee comprising of S. Mohanchand Dadha, Dilip S.
Shanghvi, Sudhir V. Valia with Hasmukh S. Shah as the Chairman. The
Committee inter alia, approves issue of duplicate certificates and oversees
and reviews all matters connected with the transfer of securities. The
committee looks into shareholders complaints like transfer of shares, non
receipt of balance sheet, non receipt of declared dividends, etc. The
Committee oversees the performance of the Registrar and Transfer Agents
and recommends measures for overall improvement in the quality of
investor services. The Board of Directors has delegated the power of
approving transfer of securities to M/s. Intime Spectrum Registry Ltd, and /or
the Company Secretary of the company.

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The Board has designated severally, Kamlesh H. Shah Company Secretary
and Ashok I. Bhuta, D.G.M. (Legal & Secretarial) as Compliance Officers

BUSINESS DEVELOPMENT

Sun Pharma is an international speciality pharma company. We have a

significant presence in the US through our subsidiary Caraco. In the rest of
world markets, we have a strong ground network of 400 committed field
force in 30 countries, with over 1000 products registered and marketed. We
have 2500-person strong sales team in India distributing through 2000
stockists, We are now at a stage of rapid growth across geographies
spanning Russia and CIS countries, China and South east Asia, Africa and
Latin America, where we are rapidly emerging as a branded generic
company of choice.

In India , we are among the largest pharmaceutical companies and command

a 3.5% market share (ORG IMS Stockist Audit, Mar 09). In India , we market
over 500 products through 18 speciality marketing divisions that are built
around chronic therapy areas. Typically, every year we introduce 25 -30 new
products. All of these are developed in- house supported by strong bulk
synthesis, formulation development, bioequivalence and regulatory teams.
CMARC (A prescription audit agency) has ranked us as no 1 in key chronic
therapy areas of Neuropsychiatry, Cardiology, Diabetology, Gastroenterology
and Ophthalmology. We also rank among the top 5 companies for
Respiratory, Pain, Cancer and Gynecology.

In-Licensing

We look at partnering and collaborating as an important strategic approach

that will complement our growth in India and international markets. Our
constant need is to add to our speciality product portfolio for prescription
leadership in India . We also seek to strengthen our presence, with a
complete basket of speciality products, in Russia and CIS countries, China
and South East Asia , Africa , Brazil and Mexico.

We are currently interested in in-licensing products that are already

marketed or are in late stage clinical development in our key therapy areas.

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We seek products that leverage our core strengths and complement our
existing product portfolio in the following therapy areas:

o CNS disorders

o Cardiology

o Diabetes and Metabolic disorders

o Gastroenterology

o Ophthalmology

o Oncology

o Pain

o Allergy, Asthma and Inflammation

o Gynecologicals

We also have strategic interest in licensing biosimilar products and new

products based on recombinant/humanized monoclonal antibody technology
that find use in these therapy areas.

We seek to establish a long term, mutually rewarding relationship based on

exclusive marketing rights business model for the above listed geographies,
as well as co-marketing or strategic alliances for co-development including
clinical trials of products for necessary regulatory approvals.

Out-licensing

Our formulation development expertise enables us to develop complex

generic products which are bioequivalent, sustained release oral dosage
forms and long acting injectable depot formulations. We offer a range of
dosage forms for oral, injectable, topical and transdermal routes developed
through non-infringing routes and/or patented routes.

o CVS

o CNS

o Pain

o Cancer

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 o Gynecologicals

o Allergy, Asthma other respiratory diseases

Our Organic synthesis team develops highly complex bulk actives like
Peptides, Hormones, Steroids, Anticancer drugs and Cephalosporins through
non-infringing routes and/or patented routes. We offer over 150 bulk actives
manufactured at USFDA/UK MHRA approved sites.

We seek out-licensing opportunities for our speciality generics, super

generics, and bulk drugs for global markets.

MANUFACTURING

With worldclass technology and a team of strong professionals, we have built

sites and systems that meet the most stringent international manufacturing
standards. Expert quality teams ensure that systems and processes remain
in compliance with the latest standards. A number of our plants hold
approvals from the USFDA and the UK MHRA. APIs and Dosage forms are
made in 19 sites across India, US, Hungary and Bangladesh.

Formulation

We make speciality formulations across a range of dosage forms- oral,

injectable and delivery system based.

API

We make speciality APIs including peptides, steroids, hormones and

anticancers at internationally approved worldclass sites.

Quality Policy

Regularly updated systems, procedures and an expert team support a

stringent quality policy.

Environmental Policy

At Sun Pharma, a concern for safety and the environment is part of our
plans.

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GROUP COMPANIES

Caraco Pharmaceutical Laboratories

Based in Detroit, Michigan, Caraco develops, manufactures, market and

distributes generic and private label pharmaceuticals* and markets them
throughout the United States. The corporation's present portfolio consists of
a number of products in various strengths and package sizes, across a
variety of therapeutic segments, including epilepsy and hypertension. For
the most recent year ending March 2008, Caraco had sales of over $350 mill.

Caraco's manufacturing facility and executive offices were constructed in

1991, after a $9.1 million loan from the Economic Development Corporation
of the city of Detroit. Since August 1997, capital infusions and loans have
primarily come from Sun Pharma.

Sun Pharma's investment in and support of Caraco has resulted in, since the
second quarter of 2002, Caraco achieving the sales to support its operations.
As on March 2008, Sun Pharma owns approx 76% on a diluted basis of the
outstanding common shares of Caraco. Sun Pharma has two R&D centers in
Baroda and Mumbai, where development work for generics is done.

Sun Pharmaceutical Industries Inc. (SPI)

Sun Pharmaceutical Industries Inc is a Michigan Corporation and a wholly

owned subsidiary of Sun Pharmaceutical Industries Ltd, India.

In the second half of 2004, Sun Pharma acquired the trademarks,

manufacturing know-how and other intellectual property of certain
pharmaceutical products from Women's First Healthcare, Inc, which was
under bankruptcy proceedings. On completion of the acquisition in
December 2004, these products were assigned to Sun Pharma Inc.

In December 2005, Sun Pharma Inc completed the purchase of dosage form
manufacturing operations of Able Labs in the US for USD 23.15 million from
the US Bankruptcy Court of the District of New Jersey, Trenton. A plant
spread over 35,000 sq ft, in Bryan, Ohio, manufactures liquids, creams, and
ointments. This plant was purchased from Valeant Pharma.

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The Ohio plant is now approved by the USFDA and the Cranbury plant
expects to receive approval shortly.

In January 2005, the company entered into a distribution and sale agreement
with Caraco. Under the agreement, Caraco distributes and sells SPI’s
products using its business organization, management personnel, and
distribution set up.

Sun Pharmaceutical (Bangladesh)

Sun Pharmaceutical (Bangladesh) is a private limited company incorporated

in March 2001 under the Companies Act 1994. This company was formed
jointly with Sun Pharma, City Overseas Ltd, a company incorporated in
Bangladesh and Sun Pharma Global Inc, a company incorporated under the
laws of the British Virgin Islands. The company began commercial operations
in October 2004. The company owns and operates a pharmaceutical factory
and makes pharmaceutical products that are sold in the local market. It
currently markets 58 products and had reported a turnover of 105 mill Rs
with a profit of Rs.22 mill Rs for the year ending March 08.

Alkaloida Chemical Company Exclusive Group Ltd.

ICN Hungary, purchased from Valeant Pharmaceuticals in 2005, is one of the

few units worldwide, authorized to make controlled substances. ICN Hungary
has now been renamed Alkaloida Chemical Company. This 170 acre site has
facilities spread over 1,75,000 sq ft for the manufacture of bulk actives, with
500 KL capacity and designated areas to make controlled substances. It has
a 150,000 sq ft facility for different dosage forms such as film coated and
effervescent tablets, capsules, etc. A large 65,000 sq ft research center has
labs across synthetic chemistry, instrumentation analytical and structural
elucidation. The site is operational with 450 people and additional
recruitments are planned over time.

MILESTONES-MAJOR STRATEGIC STEPS

1983
Sun Pharma begins operations in Kolkata with 5 psychiatry - based products,
first with 2 people and then with a 10 - employee team. Year 1 turnover - Rs.
1 million. Within a year, the marketing effort is expanded to cover all eastern
states. A compact manufacturing facility for tablets/capsules is set up at
Vapi.

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1986
Administrative office is set up in Mumbai. Customer coverage extends to
select cities in Western India.

1987
Marketing operations are rolled out nation-wide.

1988
With the launch of the brands Monotrate and Angizem, the first few
cardiology products are launched. We feature for the first time in a market
audit by the prescription tracking company, ORG* at rank 107th with 0.1%
market share.

1989
The corporate office is shifted to Baroda, in the western state of Gujarat.
Products used in gastroenterology are introduced. Exports to neighboring
countries begin.

1991
Construction begins at the first research center SPARC (Sun Pharma
Advanced Research center), with 46,000 sq ft of research space, and
investments of almost the size of that year's profits. The company's turnover
is Rs. 9.74 cr, and market rank is 70th.

1993
SPARC, the first research center, is inaugurated by His Excellency Shri K. R.
Narayanan, the Vice President of India. An office is begun in Moscow.
Products are now registered across 10 markets.

1994
After an IPO in October, we are listed on the major stock exchanges in India.
The offering is oversubscribed 55 times. A dosage form plant at Silvassa
starts production. Major expansion at the plant in Vapi is completed. For the
first time, a brand from the company, Monotrate, features among the top
250 pharma brands in the Indian market. Experimenting with a focused
marketing approach, a separate division, Synergy, is carved out to market
Psychiatry/ Neurology products.

1995
Our first API plant at Panoli starts production.
A new division, Aztec, now renamed Azura, is begun for cardiology products,
with a further reallocation of products across divisions. Inca, a new division

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to market critical care medication to intensive care units begins operations.
International marketing is strengthened with offices in Ukraine and Belarus.

1996
An API-manufacturing unit at Ahmednagar, the first of the our acquisitions, is
bought from Knoll Pharma. An equity stake is also picked up in Gujarat Lyka
Organics Ltd., a manufacturer of Cephalexin Active with a USFDA approval
for the intermediate, 7ADCA. At the close of the year, we rank 27th with 2
products among the country's top selling 300 pharma brands. Product
registrations are now in place across 24 countries.

1997
We begin the first of our international acquisitions. As part of a technology-
for-equity agreement, a stake is acquired in a generic dosage form
manufacturer; the Detroit-based Caraco Pharm Labs. An equity stake is
taken in MJ Pharma, a manufacturer of several dosage form lines with UK
MHRA approval for Cephalexin capsules.
TDPL, a company with an extensive product offering (oncology, fertility,
anesthesiology, pain management) is merged with Sun Pharma. Non
profitable/small generic lines and several smaller brands are dropped to
rationalize the product mix. TDPL's products offer a ready entry with known
brands and customer equity into new high growth therapy areas like
oncology and gynecology. Marketing is reorganized once again, this time into
6 speciality-focused divisions. A research and development facility over
6,000 sq ft in Mumbai, our second research site, is established. This center is
equipped to make dosage forms and create supporting technical
documentation for the generic markets in North America and Europe.

1998
A basket of brands, which include several in the respiratory/asthma area, are
acquired from Natco Pharma. Our new formulation plant at Silvassa
commences operations.

1999
Rank moves within the top 10 in the domestic market. For a quick entry in
ophthalmology, Milmet Labs is merged into Sun Pharma. The Cephalexin API
manufacturer Gujarat Lyka Organics is merged with Sun Pharma. 6 brands
now feature among the leading 300 prescription pharma brands in India.

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2000
Ranked 5th among all companies in the domestic market on a monthly basis.
Pradeep Drug company, a Chennai based API manufacturer is merged with
Sun Pharma.

Plans are shared to set up a new research campus in Chennai, which is later
dropped as a suitable site is found in Baroda where we have an existing
base.

2001
A new formulation plant is built in Dadra. This new plant is spread over a 5-
acre site with built up area of 120,000-sq. ft. and has been designed and
built to comply with international regulatory requirements, such as the
UKMHRA and USFDA.
The erstwhile TDPL division is renamed Spectra. A new division, Arian,
targeting cardiologists/physicians and diabetologists, is launched.

2002
Forbes Global ranks Sun Pharma in the list of best small 200 companies for
2002 (turnover less than $500 million).
Sun Pharma is selected as the best company by Express Pharma Pulse, for
overall performance for 2002 (in the category A - market share over 2.5%).

4 manufacturing sites win the prestigious IDMA awards.

Work commences on a new, state-of-the-art drug discovery campus in

Baroda; this 16-acre site, with space for 400+ scientists on completion, will
be commissioned over the next two years.

Work begins on a new R&D center in Mumbai, with 50,000 sq. ft. floor area
for projects aimed at the North American and European markets.

2003
Forbes Global ranks Sun Pharma in the list of the best small 200 companies
for 2003 (turnover less than $500million).
Sun Pharma is rated amongst the best-managed companies for 2003 across
all sectors. (Business Today-AT Kearney study of best-managed companies)

2004

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Sun Pharma acquires common stock and options from 2 large shareholders
of Caraco, increasing stake to over 60% from 44% at a total outlay of about
$42 million. By 2007, this stake has reached 75% on a diluted basis.
The formulation site in Halol, India (the erstwhile MJ Pharma site) receives
approval from USFDA, UK MHRA, South African MCC, Brazilian ANVISA and
Columbian INVIMA.

The BT Stern Stewart survey places Sun Pharma among the top 20 wealth
creators in India and among the top 3 wealth creators in the pharma sector.

Construction at a formulation manufacturing site at Jammu is completed.

Our first joint venture manufacturing unit, in Dhaka, Bangladesh is

commissioned. This modern site is spread over 25,000 sq. ft.

Two of Sun Pharma's API factories receive USFDA approval, taking the total
number of US FDA approved sites to three.

Sun Pharma acquires a Cephalosporin Actives manufacturer, Phlox Pharma,

with European approval for cefuroxime axetil amorphous. By 2007, a
formulations facility to make sterile and non sterile formulations have been
built, and the API and non-sterile sections have been approved by the
USFDA.

Niche brands are bought from the San Diego, US based Women's First
Healthcare. (WFHC, not listed). These brands are the gynecological Ortho-
Est® (estropipate), and the antimigraine preparation Midrin®.

Forbes Global ranks Sun Pharma in the list of most valuable companies for
2004 (turnover less than $2bill).

2005
Sun Pharma buys a plant in Bryan, Ohio, US and the business of ICN,
Hungary from Valeant Pharma.Sun Pharma acquires the intellectual property
and assets of Able Labs from the US District Bankruptcy court in New Jersey
in December 2005.
Dilip Shanghvi, the CMD, receives the E&Y Entrepreneur of the Year award in
healthcare and life sciences for 2005.

Sun Pharma is selected by Forbes amongst the best 200 companies (sales
less than USD 1 billion) in Asia. This is the fourth time in 5 years that the
company has been selected.

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2006
Announced the demerger of innovative business with pipelines, people,
equipment and funding, into a new company.

2007
Completed the demerger of the innovative business, with requisite legal and
regulatory approvals. SPARC ltd, the new company, is listed on the stock
exchanges in India, the first pure research company to be so listed.
In May 2007, we, along with our subsidiaries, signed definitive agreements to
acquire Taro Pharmaceutical Industries Ltd., (TAROF, Pink Sheets), a
multinational generic manufacturer with established subsidiaries,
manufacturing and products across the U.S., Israel, Canada for $454 mill.
This all-cash deal is subject to Taro shareholder approval and requisite
regulatory clearances

2008
In November 2008, we along with our subsidiaries, acquired 100% ownership
of Chattem Chemicals, Inc.,a narcotic raw material importer and
manufacturer of controlled substances with a approved facility in Tennessee.
This will offer vertical integration for our controlled substance dosage form
business in the US. (*ORG - Operations Research Group Audit of Retail
Chemist Sales, later renamed the IMS - ORG Retail Store Audit. Both ORG
and IMS are the trademarks of their registered owners).

LOOKING AHEAD

Over the last few years, we have been moving towards a profile that is much
more international and formulation-driven.

The Sun Pharma of tomorrow will have brands registered in major markets of
the world, and in most markets, promoted by a high quality field force. In
India, we expect to retain our position of market leadership in our key
therapy areas, and reach leadership in newer therapy areas that we entered
after 1997. In key international markets across Asia, South East Asia, Russia,
China, the Middle East, Latam and Africa we would be a strong speciality
company with prescription driven sales. With a strong network and
established company equity, we would be an excellent partner for a
company seeking to license out products across markets.

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In the high value generic markets of the US we expect to become a
respected generic company, with a portfolio comprising both of complex and
simple-to-file generics, building an edge with technology and the cost
advantage of vertical integration. While we have recently completed our
fourth acquisition in the US, we believe there are excellent opportunities in
the US generic space, where we can affect a turnaround and add value to a
business. We have about $400 million earmarked for acquisitions in the US
generic/drug discovery space.

ANALYSIS

Swot analysis

Strengths:

• Sun Pharma is highly regarded for its ability to launch new products
with a great amount of speed and consistency.

• The company has only 20% exposure to the DPCO.

• The past growth rate of the company has always been double that of
the industry as a whole.

Weaknesses:

• Continuous losses of Caraco Pharma is a major concern for Sun

Pharma.

• The profit margins are declining for the company

Opportunities:

• The relaxation of DPCO will be a big boost for the company and this
might marginally improve the profit margin.

• The company has already made ANDAs (Abbreviated new drug

application) in USA and it provides a great opportunity for growth for
the company.

• The company has entered the US market through its subsidiary Caraco
Pharma. This provides a great opportunity for the company to make
the most out of the expiring patents in USA.

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 • Expanding the generic drugs market in USA

• New venture in animal drug.

Threats:

• The entry of foreign players will pose a major threat to the company.

• The company is more into acquisition based growth and this might lead
to a stage of financial crunch as it has already happened in the case of
Caraco pharma. Sun pharma provided debt to Caraco and is facing
problems due to the continuous losses made by the latter.

Numerous
opportunities for
Sun Pharma is (5) Sun
Pharm
a
Support a turn Support an
around oriented aggressive strategy
strategy
Critical weaknesses Substantial
for Sun Pharma is strength for Sun
(2) Pharma (3)
Support defensive Supports
strategy diversification
19 | P a g estrategy
 Major threats for
Sun Pharma is (2)

Five force model in Industry Competition:

Pharmaceutical industry is one of the most competitive industries in the
country with as many as 10,000 different players fighting for the same pie.
The rivalry in the industry can be gauged from the fact that the top player in
the country has only 6% market share, and the top five players together
have about 18% market share. Thus, the concentration ratio for this industry
is very low. High growth prospects make it attractive for new players to enter
in the industry. Another major factor that adds to the industry rivalry is the
fact that the entry barriers to pharmaceutical industry are very low. The
fixed cost requirement is low but the need for working capital is high. The
fixed asset turnover, which is one of the gauges of fixed cost requirements,
tells us that in bigger companies this ratio is in the range of 3.5 to 4 times.
For smaller companies, it would be even higher. Many smaller players that
are focused on a particular region, have a better hang of the distribution
channel, making it easier to succeed, albeit in a limited way. An important
fact is that pharmaceutical industry is a stable market and its growth rate
generally tracks the economic growth of the country with some multiple (1.2
times average in India). Though volume growth has been consistent over a
period of time, value growth has not followed in tandem.The product
differentiation is one key factor, which gives competitive advantage to the
firms in any industry. However, in pharmaceutical industry product
differentiation is not possible since India has followed process patents till
date, with laws favoring imitators. Consequently, product differentiation is
not the driver, cost competitiveness is. However, companies like Pfizer and
Glaxo have created big brands in over the years, which act as product
differentiation tools. This will enhance over the long term, as product patents
come into play from 2005.

Bargaining Power Of Buyers

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The unique feature of pharmaceutical industry is that the end user of the
product is different from the influencer (read doctor). The consumer has no
choice but to buy what doctor says. However, when we look at the buyer's
power, we look at the influence they have on the prices of the product. In
pharma industry, the buyers are scattered and they as such does not wield
much power in the pricing of the products. However, government with its
policies, plays an important role in regulating pricing through the NPPA
(National Pharmaceutical Pricing Authority).

Bargaining Power Of Suppliers

The pharmaceutical industry depends upon several organic chemicals. The

chemical industry is again very competitive and fragmented. The chemicals
used in the pharmaceutical industry are largely a commodity. The suppliers
have very low bargaining power and the companies in the pharmaceutical
industry can switch from their suppliers without incurring a very high cost.
However, what can happen is that the supplier can go for forward integration
to become a pharmaceutical company. Companies like Orchid Chemicals and
Sashun Chemicals were basically chemical companies, who turned
themselves into pharmaceutical companies.

Barriers To Entry

Pharmaceutical industry is one of the most easily accessible industries for an

entrepreneur in India. The capital requirement for the industry is very low,
creating a regional distribution network is easy, since the point of sales is
restricted in this industry in India. However, creating brand awareness and
franchisee amongst doctors is the key for long-term survival. Also, quality
regulations by the government may put some hindrance for establishing new
manufacturing operations. Going forward, the impending new patent regime
will raise the barriers to entry. But it is unlikely to discourage new entrants,
as market for generics will be as huge.

Threat Of Substitutes

This is one of the great advantages of the pharmaceutical industry.

Whatever happens, demand for pharmaceutical products continues and the
industry thrives. One of the key reasons for high competitiveness in the
industry is that as an on going concern, pharmaceutical industry seems to

21 | P a g e
have an infinite future. However, in recent times, the advances made in the
field of biotechnology, can prove to be a threat to the synthetic
pharmaceutical industry.

General interpretation

1. Strategy and Approach

a. Create sustainable revenue streams

i. Focus : Chronic therapies

ii. Differentiation : Technically complex products

iii. Speed to market

b. Seek cost leadership

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 i. Vertical integration : Development through Manufacturing
(API and Finished Dosage) to Marketing

ii. Optimise operational costs

c. Balance profitability and investments for future

i. Acquisitions yielding high ROI

ii. Development of complex generics

2. Growing Steadily

Revenue doubles and Net profit triples in 4 years; continuing the trend
despite increasing size.

45,000
42,723

40,000

35,000

30,000

25,000

18,177 20,000

15,000
11,853

10,000

5,435
3,962 5,000
1,706 1,352
491
-
93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09

Net Sales (CAGR 35%) Net Profit (CAGR 42%)

3. Relentless Customer Focus

1998 Market Share indexed to 100 for all companies

23 | P a g e
 220

180

140

100

60
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Sun Cipla Ranbaxy Nicholas Cadila DRL

• Therapy focused marketing by 2500 sales representatives covering

125,000 specialist doctors

• Strong increase in prescription and sales market share

4. Successful At Acquisitions

Acquired 14 high potential yet under-performing businesses; successful

turnarounds.

5. Research and Development

• Generic R&D spend around 8% of net sales

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 • Strong research teams in generics, finished dosage development,
biological support, chemistry

• Balancing the risk

o Immediate term : ANDA, DMF, Products for India

o Medium term : Drug delivery systems

• 2 R&D centers with about 600 scientists.

6. Sustained Profitability

• Superior business model

• Margins consistently higher than peers

90%
80%
80%

70%

62%
60%

50%
44%
40% 43%

30%

20%
11%
10% 10%

0%
2004-05 2005-06 2006-07 2007-08 2008-09

Gross Margin (Sun) Gross Margin (Other top 10)

EBITDA Margin (Sun) EBITDA Margin (Other top 10)
Net Margin (Sun) Net Margin (Other top 10)

Gross margin= (Net Sales – Material Cost) / Net Sales * 100

Other top 10 Indian Pharma companies include Ranbaxy, DRL, Cipla, Piramal
Healthcare, Lupin, Wockhardt, Cadila, Aurobindo, Glenmark and Torrent

25 | P a g e
References

• www.timesofindia.com

• www.economictimes.com

• Magazines-Business Today and Outlook

• www.sunpharma.com

• http://www.karvy.com/compresearch/company/sunpharma/sun.htm

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