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Sun Pharmaceutical Industries (BOM:524715) |
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Sun Pharmaceuticals
Sun Pharma holds 3.4% share of the domestic pharma market (as per the latest ORG IMS MAT data) and has a strong presence in the lifestyle therapeutic segments. The company started focusing on the exports market in FY02, when it increased its stake to 48% in the US-based Caraco Pharma. Currently, the stake in Caraco stands at 76%. Exports contribute around 57% to revenues. With the help of Caraco, Sun Pharma has been able to grow its US business, which brings in synergies by way of backward integration in both manufacturing and R&D.
Sun Pharma’s revenues during FY09 grew by 27% YoY largely driven by the domestic and export API businesses. However, Caraco’s performance was impacted as it had to recall many products from the US market since its manufacturing facility at Detroit had received warning letters from the US FDA. Operating margins reduced by 2.6% YoY due to the rise in other expenses incurred on the recall of products mainly in the US. The bottomline registered a 22% YoY growth and was lower than the growth in the topline on account of the contraction in operating margins and higher depreciation charges and tax expenses.
Going forward, revenues from the US will be impacted till such time Caraco’s issues with the US FDA get resolved. The management, however, is confident that while performance will be impacted in the short term, in the medium and long term, the business will continue to do well. Sun Pharma’s domestic formulations business is likely to witness strong growth going forward, due to the company’s focus on the lifestyle segment and technologically complex products. Sun Pharma’s acquisition of Taro having run into trouble; uncertainty with respect to the same remains.
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