"We typically invest 8-10% of turnover on R&D"

-Dilip Shanghvi, CMD, Sun Pharmaceuticals

What percentage of the company's revenues is spent on R&D?

At Sun Pharma Advanced Research Company (SPARC), the revenues will begin only once it licenses out a product or a technology, or has a product in the market. It has a burn rate of about $20-25 million annually, and no revenues. It will need $65-70 million to take projects ahead in the next few years. At Sun Pharma, which is a generic pharma company, we typically invest 8-10 percent of our turnover on R&D.

How much money do you plan to invest in the R&D unit(s) in the next few years and how much has been invested till date?

SPARC is likely invest $65-70 million in the next few years.

Has the unit(s) generated any revenues so far? How many people does it employ?

This year it had a small income related to technology transfer. SPARC employs 180 scientists across two research centers in Baroda and Mumbai.

What is the business model of the company after the hive off?

The revenue model is that of any R&D company, it creates intellectual property and seeks to maximize the returns on this asst. It will bring products and technologies to market across different markets, either on its own or with partners.

What is the vision for the R&D unit in the next few years? Are you looking at any acquisitions?

Broadly speaking, while maximizing the opportunity for each product, SPARC will also attempt to experience and internalize the basics of the new drug development lifecycle by carrying a drug candidate on its own, as long as possible. For SPARC, acquisitions are not a priority.

How much equity does the parent company hold in the R&D unit and how much will be held by the shareholders (percentage wise)?

In the way we have demerged our R&D, there is no parent company. No equity is held by Sun Pharma in SPARC. I own about 65 percent in Sun Pharma and as well as in SPARC, and the rest is with the public. All shareholders of Sun Pharma received the same number of shares in the R&D company (SPARC) as they had in Sun Pharma.

Sun Pharma Advanced Research Company (SPARC) is listed on the stock exchange. What are the benefits to the investor of getting listed?

The benefit to the investor is that depending on their own risk profile and the investing horizon, an investor can invest either in a generic company with predictable returns (Sun Pharma), or a research company with uncertain timeframe but a different magnitude of upside should a product clear all the phases of research and reach market (SPARC).

Nayantara Som