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Sun Pharma In The News

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Taro, Caraco weigh on Sun Pharma's profits


Drug maker's net increases only 3% to Rs 350 crore despite revenue rising 57% for the December quarter
I ntegration of revenue from the recently merged Taro Pharmaceutical Industries Ltd has pushed net sales of Sun Pharmaceutical Industries Ltd up by 57% to Rs 1,601 crore for the December quarter but it has not translated into higher growth in net profit for the Mumbai-based drug firm.
Net profit at India's largest drug maker by market value grew only 3% to Rs 350 crore during the quarter compared with a year ago's Rs 342 crore. This was lower than the Rs 450 average of 23 analyst estimates compiled by Bloomberg.
Taro's low margin and losses made by Sun Pharmaceutical Industries' US subsidiary Caraco Pharmaceutical Laboratory Ltd had an impact on the company's net profit.
Taro recently announced unaudited financials for the December quarter. Net sales at $102 million showed a growth of 23% over the same period last year. Net profit for the quarter at $4.4 million dropped 95%, primarily on account of a large tax expense in the quarter.
"The company's overall per'formance across most markets continued to be in line with our expectations," said Sun Pharma's chairman and man'aging director Dilip Shanghvi.
Its US ' subsidiary Caraco continued showing a drop in sales and profit since the US drug regulator's action stalling production at its factory.
Caraco posted 22% fall in sales at $40.4 million during the quarter against the year-ago quarter, and recorded a net loss of $3 million.
Production at Caraco's manufacturing plant in Detroit was halted after US regulators confiscated drugs made at the fa'cility in June 2009, citing violations in manufacturing standards.
Sun Pharma's generic medicines include those used to treat pain, depression, hypertension and diabetes, according to the company's website.
"Unless and until the manufacturing issues are resolved, you are not going to see a bright future for Caraco," said Siddhant Khandekar, an ana'lyst at ICICIdirect in Mumbai. "The matter will remain a stumbling block going ahead."
Investors' concern on narrow growth in net profit and the challenges ahead for the company to sustain profitabili'ty led to a drop in stock price on Monday.
The scrip lost 1.86% to close at Rs 440.6 apiece on the Bombay Stock Exchange even as the exchange's benchmark in'dex, Sensex, lost 0.37% to close at 18,327.76 points.
"Though Sun Pharma has grown above industry average in the domestic market, sustaining a strong sales of Taro, and making a turnaround of Caraco will remain a key challenge for the Sun Pharma management," said sector analyst Ranjit Kapadia, senior vice-president, institutional re'search, at HDFC Securities Ltd.
"Medium to long term priorities remain focused on building a stronger presence in our key as well as emerging markets. Towards this, we continue to invest in enriching our product pipelines for each of the business segments, work towards gaining market share in key products and therapy areas as well as enhancing our capability to meet the exacting regulatory standards across the world," Shangvi's statement said.
"Improving Taro's long-term sustainability and growth po'tential is work in progress, even as we continue to evalu'ate other strategic opportunities," it added.
Sun Pharma acquired a controlling stake in Yakum, Israel-based Taro Pharmaceutical In'dustries Ltd in September, af'ter a legal battle that stretched for three years. The acquisition gave the drug maker access to factories in North America and a portfolio of cardiac and skin-care medicines.
Adi Narayan of Bloomberg contributed to this story