Sun Pharmaceuticals posted a healthy 57 per cent year-on-year growth in its consolidated revenues in the December quarter.

This was largely helped by its continued stronghold in the domestic formulations besides a full quarter contribution from its new subsidiary, Taro Pharma.

After a prolonged three-year battle, the December quarter is the first quarter to have Taro's financials (for the entire quarter) to be consolidated into Sun's. The company's operating margins, at 28 per cent, however, contracted significantly led by a surge in staff cost (due to Taro) and other expenses.

Higher depreciation, again due to addition of Taro financials, suppressed the profit growth to a mere three per cent.

Domestic Formulations

Sun reported a 20 per cent growth in domestic formulation during the quarter (40 per cent of total sales). For the nine-months ended December 2010, it reported a higher growth of about 43 per cent, helped primarily by the low base of last year (due to change in distribution policy). It now holds a market share of 3.7 per cent in the domestic market.

Notably, Sun continues to be ranked No. 1 on share of prescriptions with six classes of specialists now (as against in Sep-2010 quarter): psychiatrists, neurologists, cardiologists, ophthalmologists, orthopedics and gastroenterologists.

According to IMS ORG report, the Indian pharma market grew by 17 per cent in 2010 while Sun Pharma managed 18 per cent growth.

Higher growth was on account of nine product launches during the quarter, taking the total count to 30 for the first nine months.

Challenges remain

Caraco, Sun's listed subsidiary in the US, reported sales of $40.4 million, down 22 per cent from the same quarter last year due the reduction in sales of distributed products.

The fall in sales, however, was in line with expectations as Caraco had earlier indicated of the same. It recorded a net loss of $3.0 million during the quarter.

For the nine-months ended December 2010, Caraco reported sales of $268.2 million and net loss of $3.3 million.

As for the FDA overhang over its manufacturing facility, there still is no clear solution, though the remediation process is still on.

Caraco management believes that it will take significant time before it reaches its previous level of manufacturing in its Detroit facility.

Sun had in December 2010, made an offer to Caraco to take it private, driven largely by the continued periods of losses reported by the US company.

Even as Sun waits for developments in this regard, its marketing agreement with Caraco has been extended to one more year now. The agreement will now expire in January 2012, after which Sun will market and sell its products in US itself.

Sun expects to set up its own marketing arm or acquire a US company with a strong sales channel by then.

Taro reported sales of about $102 million, up by 23 per cent over the same period last year. Higher provisioning for taxes, however, ate into its profits, lowering it by about 95 per cent, to $4.4 million.

During the quarter, Sun filed ANDAs for five products, making it a total of 13 ANDAs for the year so far (between Sun and Caraco). It now totally has ANDAs for 369 products filed (including Taro), of which 220 have been approved (as of December 31, 2010).

Emerging market branded sales was lower by six per cent for the quarter and up by seven per cent for the nine-months to December 2010.

Growth guidance

The management has upped its growth guidance from 35 per cent to 42 per cent for the current year. This, however, is lower than the 46 per cent year-to-date sales growth put in by the company so far due to potential risks that the management foresees.

It expects all its underlying businesses to perform well. Monetising of limited competition opportunities such as Taxotere (docetaxel) and Gemzar (gemcitabine) should help the company improve its margins from hereon.

Related Topics
comment COMMENT NOW