Sun Pharma reported 32 per cent revenue growth for the March quarter aided by healthy growth in the US market. The integration of recent acquisitions and sales of products such as generic Doxil led to the 77 per cent jump in US revenues.
Also, price increases in specific products such as anti-bacterial doxycycline hyclate aided growth during the quarter. With cash in excess of Rs 4,058 crore, the company continues to pursue acquisition opportunities in its key markets. A weak rupee and a favourable product mix helped Sun Pharma maintain its operating margin at 41.3 per cent during the quarter, slightly higher than in the previous year.
Lower margins
This is despite an 8 percentage point decline in operating margins for its US subsidiary, Taro Pharma, and consolidation of its recent US acquisitions, DUSA and URL Pharma (whose margins are lower than Sun’s overall margins).
Taro’s margins were lower during the quarter due to a one-time settlement and loss contingencies amounting to $22 million (Rs 119 crore) on account of certain litigations.
Sun’s formulation sales in the home market declined 11 per cent, due to one-off sales in the same period last year. The company changed its accounting method for discounts and sales returns last fiscal.
These expenses are now adjusted against sales, compared to the erstwhile practice of accounting the same under expenses. Adjusting for this, the domestic business grew 16 per cent for the quarter. Given Sun’s leadership in niche therapy areas, the impact due to the new pricing policy may not exceed Rs 50 crore (less than 0.5 per cent of total sales).
Sun’s revenues in other overseas markets grew 22 per cent during the quarter.
The management hopes to achieve 18-20 per cent revenue growth in the current fiscal.
Integration of its recent acquisitions in the US may provide a leg-up to Sun’s sales in 2013-14. But the ongoing litigation to determine the quantum of penalty to be paid by Sun for the launch of the generic version of Wyeth’s Protonix may be the event to watch for.