Sun Pharma: Here comes the sun

Armed with approvals to sell four abbreviated new drugs applications( ANDAs) in the US, Sun Pharma hopes to grow its revenues from that market by about 25 per cent in the current year. Sales from this geography in 2007-08 were around Rs 1,400 crore, accounting for about 40 per cent of the company’s revenues. In the September 2008 quarter, US sales contributed 43 per cent to total revenues.

Sun can now sell a generic analgesic, a cholesterol reducing agent, an injectible and an anti-histamine and while it’s hard to estimate what these would fetch, the estimated addressable market for the branded and generics versions of these four drugs together is about $650 million. The delay in the launch of Effexor - an anti-depressant - in the US market as also the warning letters written by the US FDA to Sun’s subsidiary Caraco in November 2008, had cast a bit of shadow on the stock but it nevertheless outperformed the market throughout 2008.

The Rs 3,357 crore Sun Pharma, now a part of the 30-scrip BSE Sensex, faces challenges similar to those encountered by Ranbaxy, which too received a couple of warnings from the US drug regulator. In some instances, despite being in a legal battle with the patent holder, Sun has ventured to sell the generic version, risking a penalty. For instance, it has sold Pantoprozole - medication for ulcers in the oesophagus - and Ethyol (an injection used before cancer treatment), in the US although it is fighting the patent-holder Wyeth in court. Sun is hoping to win approvals to launch around 100 ANDAs - injectibles, nasal sprays, creams and ointments - in the US market over the next few years.

Sun remains India’s most valued pharma company with a market capitalisation of Rs 23,255 crore, as also the most profitable; operating margins were 46 per cent in the September 2008 quarter compared with 8 per cent for Ranbaxy and 14.4 per cent for Dr Reddy’s Labs. It hopes to grow by at least 20 per cent this year in the home market, having already done so in the first six months thanks to strong products in the cardiology and psychiatry segments. Should that happen, Sun’s revenues this year should be up 23-24 per cent. However, the pace could slow down to around 14-15 per cent in 2009-10 on a higher base, the delay in the launch of Effexor and the absence of any products being sold exclusively in the US markets.