How desi brothers built a $1.8 bn drug co

Amneal Pharmaceuticals is set to pip Sun Pharma as the fifth largest generics maker in the US, reports Sohini Das.

Illustration: Dominic Xavier/Rediff.com.

Two Indian-American brothers hailing from Gujarat, Chirag and Chintu Patel, have built a $1.8-billion drug major Amneal Pharmaceuticals in the US from scratch in around a decade and a half.

After its recent merger with Impax Laboratories last month, the combined entity, with revenues of $1.75-1.85 billion, is close to pipping Indian giant Sun Pharmaceutical ($2 billion revenue in 2016-17) as the fifth-largest generics maker in the US.

Amneal expects revenues to touch $2.6 billion by 2020.

The brothers, who spent the first two decades of their lives among a 45-member joint family in India, are, however, cautious about entering the Indian market.

“The Indian generics market is already crowded with affordable drugs. For us, competing with already established firms here will be difficult. We want to bring in technology-led innovative drugs that will target unmet medical needs in India like sickle cell anaemia or some niche oncology product,” said Chirag Patel, co-chief executive officer, co-chairman and co-founder of Amneal.

The company already has six sites in India -- four formulations and two API -- in Gujarat, Telangana and Andhra Pradesh that supply to the US and European markets.

Amneal plans to enter India with speciality drugs three or four years from now, but whenever it does enter, it will set up its own network in the country.

It has been investing 20 per cent of its turnover in research and development (R&D), around $1 billion in the past five years. It will now focus on complex generics, biologics and hospital products.

The journey began when the Patel family migrated to the US in 1987. Kanu Patel, the father, was an industrial pharmacist by training who worked as a drug regulatory inspector in India.

“We came to the US with nothing. We started working from Day 1 and continued to study,” Chintu Patel says.

Both brothers agree that the education and business environments in the US foster and reward the entrepreneurial spirit. Chirag Patel began his business pursuits with technology start-ups. Chintu Patel followed in his father’s footsteps as a pharmacist.

During his time as a pharmacist, generic substitution rates were less than 40 per cent in the US, and Chintu Patel witnessed first-hand the struggle patients had in choosing between buying food and medicine.

Amneal was born sensing this need for affordable medicines and is now one of the fastest growing global generics players in the world with more than 160 FDA approvals for marketing generic drugs.

With capital from the principals of private investment group Tarsadia Investments and more than 10 merger and acquisition deals since 2007 (see chart), Amneal is rapidly growing to be the fifth-largest US generics pharmaceutical company by prescription volume, with 5,000 employees in North America, Europe and Asia.

Sun Pharma had clocked revenues of $2 billion in 2016-17, but the Street expects its 2017-18 revenues to be lower, given the headwinds it is facing in the US market. The combined gross revenues of Amneal and Impax have thus edged past Sun Pharma’s revenues in the US.

In October this year, the New Jersey-based privately held generics maker Amneal merged with the California-based Impax in an all-stock deal.

Amneal will own 75 per cent and Impax shareholders will own 25 per cent of the combined entity that will retain the name Amneal Pharmaceuticals.

As a result of the merger, the combined entity is expected to generate $200 million in cost savings per year. Amneal will not only pare debt, but the combined entity now has one of the largest pipelines in the US with approximately 165 products in active stages of development and around 150 pending ANDAs.

Most of the pipeline products are first-to-file opportunities that will face limited competition in the market at the time of launch.

The Patel brothers have exhibited astute business sense, be it in acquiring ANDAs from Merck or investing heavily in R&D or in developing low-cost manufacturing bases in India.

The company has chosen the inorganic route to grow at a rapid pace. Now that it is looking at the China and India markets over the medium term, the next leg of growth for Amneal is set to unfold.