Sun Pharmaceutical Industries, emboldened by its takeover of domestic rival Ranbaxy Laboratories, is willing to spend as much as $7 billion on further acquisitions, bankers familiar with the generic drugmaker's strategy said.
The just completed Ranbaxy deal, its biggest to date at $3.2 billion, has given India's biggest drugmaker sufficient scale in generics and emerging markets to think about its next step - beefing up expertise in higher margin products and gaining a bigger global presence.
On Sun Pharma's radar are US and European companies that develop biosimilars - cheaper copies of biotech drugs, which have become some of world's hottest selling medicines, investment bankers say.
"What has changed after the Ranbaxy acquisition is that their ambition has grown and now they want to become a global company which is more innovation-oriented," said a banker at a foreign bank with knowledge of Sun Pharma's plans.
Dilip Shanghvi, who with his family controls Sun Pharma and is India's second richest man according to Forbes magazine, feels the need for a "transformational acquisition", but will be patient about finding the right candidate, he added.
Sun Pharma, which has a market value of nearly $36 billion, is also interested in non-biotech complex generic medicines that offer better margins than the simpler copycat drugs Indian drugmakers usually specialise in.
It is willing to look at either whole companies or acquire complex generics on their own, the bankers said, declining to be identified as they were not authorised to speak to the media on the matter.
In one potential near-term opportunity, they said Sun Pharma may emerge as a bidder for some drugs Teva Pharmaceutical Industries, the world's biggest generic drugmaker, will likely be required to divest if it is successful in its unsolicited $40 billion bid for rival Mylan.
A Sun Pharma spokesman declined to comment for this article. Shanghvi said last month the Ranbaxy deal did not preclude Sun Pharma from further M&A, especially if the target company has capable management.
But he also said Sun Pharma will focus for the time being on resolving quality problems at Ranbaxy factories.
With a cash balance of $1.5 billion and a debt-to-equity ratio of just 0.13, Sun Pharma would find it easy to take on debt to fund any large acquisition, the bankers said.
"The company is also generating lot of cash every year and if they don't use it to fuel growth, it will erode shareholder value," said an India M&A head at a European bank.
Sun Pharma, already the most acquisitive of India's drugmakers, this month hired Arvind Kumar, a former M&A executive at Reliance Industries and JSW Steel, to head its acquisitions team, sources said.
Kumar's LinkedIn profile confirms the appointment, although a Sun Pharma spokesman declined to comment.
In recent years, Sun Pharma has weighed bids for eye products-maker Bausch & Lomb Holdings Inc, which was later sold for $8.7 billion, Swedish drug firm Meda AB as well as German generic maker Stada Arzneimittel AG, sources have said.
But now, Sun Pharma is most likely to gun for a biosimilar deal, bankers and analysts say, as biotech medicines currently account for six of the 10 biggest-selling drugs in the world and as it lags domestic rivals Biocon and Dr Reddy's Laboratories in the field.
The global biotech market, currently worth over $100 billion annually, will reach $200 billion in 2016-2017, according to forecasts by IMS Health.
Previous Sun Pharma deals include the $230 million purchase of US-based dermatology specialist Dusa Pharmaceuticals in 2012 and $450 million acquisition of a majority stake in Israel's Taro Pharmaceutical Industries Ltd.