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Sun Pharma In The News

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Sun Pharma Resumes Strong Performance; One-off Items Help

KIRAN KABTTASOMVANSHI  ETINTELLICENCECROUP Sun Pharma continued with its trend of logging a strong performance in the Sep­tember quarter—thanks again to the two one-off items i.e. sales of oncology drug Lipodox in the US and a favourable cur­rency movement.

With Caraco resuming manufacturing at its facilities in Michigan, the company is likely to gradually recover its losses in revenues. The company posted a sequen­tially improved performance with a growth of 15% in revenues in the domes­tic business. This is likely to improve in the second half of the fiscal.

There are nevertheless two concerns that stand out from the company's perform­ance in the quarter.

One pertains to the Rs584-crore provision made towards potential damages in re­spect of patent infringement litigation re­lated to the generic version of Wyeth's drug Protonix.

The second is related to the early signs of weakness in Taro's performance in the form of declining volumes.

However, even before Taro's performance starts waning, the company has in its latest acquisition — Dusa — another growth driver in the dermatology space in the US.

While not offering any synergy with Ta­ro's dermatology business, Dusa has a pat­ent protected drug-device treatment for curing skin lesions. The US alone has over 5 million treatments per year with Dusa having 5% share of it. A drug-device com­bination is difficult to copy for a generic company.
With a stellar performance in the first half of this fiscal, the company has in­creased its revenue guidance for the fiscal year from 18-20 % to 30-32 %.
With the company's stock trading near a record high, most of the performance-re­lated positives have been factored into. The stock is trading at premium valua­tions with a price-to-earnings multiple of 25 on a trailing four-quarter basis.
However, the next inorganic route adopt­ed by the company shall hold a surprise for the company's investors.
The company has already passed an en­abling resolution of raising Rs8,000 crore to generate funds for any big acquisition that it might do in the future. Given its past track record, investors can trust the com­pany to go for strategically important ac­quisitions in its key markets.