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Sun Pharma In The News

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Sun Shines Better with Successful Taro Formula


Sun Pharma's Q4 per'formance had the 'Taro effect' written all over it. Sun completed the much-litigated Taro acquisition in September 2010 rendering its consolidated quarterly performance incomparable with the same quarter last fiscal. However, Taro has reg'istered strong growth in sales and improvement in margins on a sequential ba'sis indicating positive im'pact of Sun's management on its operations. It contrib'uted one-third of Sun's con'solidated net sales and one-fourth to the latter's net prof'it. As a result, Sun managed to post 35% rise in net sales and 12% growth in net profit ' exceeding analysts' expectations.
Barring Taro, no major mo'mentum registered by Sun's business in the US was con'cerning. Existing product range in the US fell below the expectation of the company's management. While the mar'gins on the company's reve'nue-earning business have re'mained intact, additional costs borne at the company's manufacturing sites in the US undergoing remediation have depressed the overall operat'ing profit margins. The com'pany's India business, con'tributing 40% of its total revenues, has performed well.
Logging a growth of 20%, Sun's domestic formulation has grown faster than the in'dustry. Maintaining its lead'ership across six chronic therapeutic areas, Sun en-joyedamarket share of 4.3%.
Taro's Canadian facility re'solving the regulatory issues with USFDA is positive for the company. However, Sun has not given any timeline or extent of cost incurred to'wards remediation mea'sures for its New Jersey and Detroit facilities in the US. This could impact the com'pany's future cash flows. Sun expects to file only 25 new drug applications with USF'DA, despite consolidation of Taro. This is lower given the fact that it has already filed 25 new drug applications in FY11, of which 10 were filed in fourth quarter itself.
The company has neverthe'less put forth an aggressive guidance of 28-30% of growth in net sales for FY12 factoring the growth registered by Taro and no revenues from facilities under remediation. Sun has al'so guided that it is scouting for acquisitions in Europe and emerging markets. The com'pany has insignificant pres'ence in Europe and an acquisi'tion may enable the company to cash into the growth oppor'tunity in Europe much earlier.
Besides, inorganic growth is not new to the company as in the past it has acquired loss-making or distressed compa'nies and turned them around. The markets reacted positive'ly to these results pulling the stock up by 4.5% on Monday Sun Pharma, the most valua'ble pharma company on the bourses, remains one of the mostpromising in the sector.