Sun Pharma’s acquisition of Ranbaxy could open the gates to more such deals with the yawning valuation gap in the drug industry. The top 10 drug manufacturers (by market value) account for 80 per cent of the industry’s market capitalisation, much higher than their revenue share of 58 per cent in 2013. There is a similar skew in profitability and revenue share for the big drug companies, raising the odds of their using market value as a currency to snap up smaller rivals. The valuation gap was at play in the Sun-Ranbaxy deal. Sun was nearly six times more valuable than Ranbaxy, despite being only 40 per cent bigger in revenues when the deal was announced earlier this week . On average, the top listed drug companies are currently valued at around 4.5 times revenues and 25 times their net profits in the past 12 months. In comparison, the industry’s median valuation is 0.6 times revenues and eight times net profits.