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Lipidox sales in US, weak rupee and a solid performance by its subsidiary Taro Pharma helped Sun Pharma grow its revenues by 41 per cent to Rs 2664 crore in the September quarter over the year ago period.
Taro’s revenues grew 16 per cent during the quarter to Rs 878 crore, accounting for a third of Sun’s revenues. Despite, the slight volume decline, price increases in select products helped the subsidiary improve its operating margins by 5.8 percentage points to 54 per cent. Taro’s net profits jumped 30 per cent to Rs 474 crore.
Healthy growth
In addition to a strong Taro performance, Lipidox exports to the US (FDA has given a temporary import permission) and a weak rupee helped a 2.7 percentage point improvement in Sun’s operating margins to 44.1 per cent. Upsides from Lipidox may wane beyond the current quarter, as Johnson and Johnson (innovator) is expected to resume full supplies of Doxil (Lipidox’s equivalent) shortly.
India formulation sales growth was lower at 15 per cent to Rs 810 crore on account of 49 per cent jump in the March quarter on the back of inventory adjustment. Adjusting for this, the underlying growth remained healthy at 19 per cent.
Adjusting for the provision of Rs 583 crore made for the likely penalty in the Protonix litigation against Wyeth, profits grew 51 per cent to Rs 903 crore during the quarter. The management has revised its revenue guidance from the earlier 18-20 per cent to 30-32 per cent.
Big-ticket targets
Sun entered into an agreement to acquire US based dermatology company Dusa Pharma for a consideration of $230 mn (Rs 1242 crore). This values the company 4.6 times and 26.6 times Dusa’s trailing 12 month revenues and earnings respectively.
Dusa derives all the revenues from its patented Levulan combination therapy and BLU-U treatment, currently approved for actinic keratoses (AK) and other derma problems. The product is undergoing Phase II trials for the treating AKs for other parts of the body.
Though the acquisition can strengthen Sun’s derma franchise in the US, the benefit may not be material in the near term. But, with Dusa currently catering to just 5 per cent of the potential 5 million AK treatments annually, immense potential remains untapped. With cash in excess of $1bn (Rs 5400 crore) and recent board nod to raise funds up to Rs 8,000 crore, Sun is exploring large-ticket acquisition targets in the US market.
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