shares information on pharmaceutical companies Sun Pharmaceutical

Sun Pharmaceutical Ltd (updated - 04 June 2010)
The three-year-long Taro saga may continue for Sun Pharma, as the management has rejected alucrative offer for its stake in the Israeli company. Sun Pharma has overlooked the $215-million offer by Guggenheim Securities for its holding in Taro and will continue its efforts to gain control of the Israeli company through the court battle.

On the face of it, had Sun taken the offer, it would have gained $140 million on its initial investment of $105 million. This offer price of $15 per share implies a premium of around seven times the current Taro share price.

Analysts believe the management should have accepted the offer as it was lucrative and the current investment in Taro was not yielding anything. Taro would have been fruitful investment for Sun three years back, when it made a bid to acquire it for $454 million, say analysts. Taro’s US base (manufacturing and distribution) and strong generic range would have given it mileage.

Sun Pharmaceutical (updated - 10 Feb 2010)
A healthy 23 per cent increase in domestic formulation sales helped Sun Pharmaceutical report an 11 per cent rise in consolidated revenues to Rs 1,021 crore for the December 2009 quarter. While the domestic market, which accounts for over half its consolidated sales, continues to do well, income from overseas operations suffered on account of issues at Caraco and lower sales of pantoprazole (a drug for treating excess stomach acid) in the US.

Sun’s subsidiary Caraco registered a 7 per cent yearon-year fall in sales to $52 million and a loss of $3 million for the quarter. Though the company is taking action to comply with regulations at its Detroit facility, it has so far not got approval from the US Food and Drug Administration (FDA) to resume manufacturing and has diverted production to its other plants in the US. Hopeful of a resolution to the issue, the company has recalled some employees of Caraco who were laid off earlier in the year.

Operating profit margins (OPM) came down 900 basis points to 37 per cent 36.1 per cent due to higher inventory and compliance costs at Caraco as well as lower sales of high-margin products such as Protonix. The 11 per cent fall in operating profits, higher taxes and lower other income led to a 17 per cent year-on-year drop in net profit.

One of the triggers for the stock will be the outcome of the battle for Israeli generic drug maker Taro Pharma, in which Sun Pharmaceutical has invested Rs 300 crore and holds 36 per cent stake. However, after the recent Israeli Supreme Court judgement asking Sun to maintain status quo on increasing its stake, it will take a while before the dust settles.

Another trigger for the stock is the FDA approval for the US launch of Effexor, an anti-depressant with a market size of close to $3 billion. Analysts say if the approval for the drug comes before the launch of Teva’s version in July, the company will have lesser competition and could get higher revenues.

Since the announcement of its December quarter results, the stock has gained over 6 per cent to Rs 1,542.50. At this price, it trades at 24 times its estimated 2010-11 earnings and captures all the upsides in the near-term.
source - BS

Three years down the line, Sun has substantial presence in the US market with a strong product range. It has manufacturing facilities through its subsidiary Caraco Pharma. It also has 84 approved abbreviated new drug application, while 123 are in line for approval. Drug Master File (DMF) and patent approvals stand at 89 and 81, respectively. A total of 155 DMF and 246 patent applications have been submitted.

Sun will have to buy five million more shares to acquire complete control of Taro. At present, Sun Pharma is the largest shareholder of Taro, with around 36 per cent stake (14.4 million shares). It can easily acquire Taro even at a higher price as it has cash of around Rs 3,700 crore. But, Sun has a strong research and development base with spending of around Rs 247 crore in FY10 and has capabilities to develop any product range to match Taro’s prowess. Thus, acquiring Taro is not amajor necessity for Sun Pharmaceutical.
source - business standard

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