Strong growth in the US led by Taro Pharma (25 per cent) and anti-cancer drug Lipidox sales (on temporary importation permission), combined with a favourable currency movement helped Sun Pharma post a robust 34 per cent year-on-year revenue growth in the December quarter. Taro’s upbeat performance was driven by price increases in select products which more than compensated for the volume decline.

Sun’s India formulations segment grew 13 per cent during the quarter. The growth seems lacklustre due to change in the accounting of discounts and sales return. Discounts and returns which were earlier treated as expenses have now been adjusted against sales. Adjusting for this, the domestic sales grew at a healthy 19 per cent ahead of the industry. Both operating profit and net profit grew 32 per cent – despite an increase in tax outgo.

Acquisitions completed

During the quarter, Sun achieved financial closure of its two US acquisitions – specialty dermatology company DUSA Pharma and URL Pharma’s generic business (acquired through subsidiary Caraco Pharma).

The URL acquisition will provide it access to 107 products and 230 ANDA (Abbreviated New Drug Application) filings. Sun’s management is hopeful of achieving robust volume growth from URL’s existing pipeline by improving productivity and tightening costs.

Merger terminated

The company recently terminated the merger agreement announced last year to acquire the balance 34 per cent stake in Taro Pharma for $39.5 per share. Sun Pharma currently owns 66 per cent stake in Taro. Considering the run up in Taro’s stock price to $51, Sun Pharma concluded that Taro shareholders may not be willing to approve the merger unless the offer price was increased substantially. With cash in excess of Rs 6,500 crore, Sun is exploring inorganic growth opportunities in the US and other emerging markets.

Sun, until recently, was given temporary importation permission to sell J&J’s anti-cancer drug Doxil’s equivalent (sold as Lipidox by Sun) in the US. But its generic filing for the same product was recently approved by the US FDA. With no other approved supplier, this may be an interesting opportunity for Sun over at least one year.

(This article was published on February 9, 2013)
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