Sun Pharma Advanced Research Company (SPARC) has become the first pure research company to be listed on the Indian stock exchange. The pharmaceutical innovation company listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) today.

SPARC was created when Mumbai-based pharmaceutical major Sun Pharma hived off its innovative research and drug development undertaking, including new drug delivery systems, into a separate company.

Such hiving off of their R&D units by pharma companies seems to be a trend now.

Dr Reddy's Laboratories, Ranbaxy, Natco Pharma, Strides Arcolabs have either deployed or are thinking of deploying similar such de-risking strategies; such a move can mitigate the risks involved in drug development and yet enable the company to conduct quality and targeted research.

Analysts across brokerages who have been tracking Sun Pharma suggest that through this smart initiative, pharma companies can reduce their R&D costs and improve the margins of their standalone business by as much as 3-4%.

According to the pharma analysts, this strategic move may fetch greater returns in the long run.

Once they start developing innovative products, the management may choose to unlock the value of these separated entities. The market value of these companies will be higher than the book value in the years to come and consequently, the parent companies can make money by diluting stake to strategic investors like PE firms and venture capitalists. They can easily recoup the initial investments for the new R&D ventures.