Sun Pharma
Published on Wednesday, November 11th, 2009 at 12:20 PMAuthor: insightt95in (169 Articles)
Sun Pharma
Under Review
Price: Rs1,404 Target Price: Under Review
Caraco 10-Q: Pantoprazole up again
* Distributed sales up 117% QoQ: Caraco 10Q for quarter ending
September 09 is now available. Of the total reported sales of $78.4m,
distributed products sales in 2QFY10 are at $75.9m. This is significantly
higher than sales in 1Q10 at $34.9m. In addition the pantoprazole sales
at c. $60m are again higher than our estimate of $25m. For the 1H10,
pantoprazole cumulative sales at c. $82m form c. 65% of the overall
net sales. We believe that with higher para-IV sales, adjusted net profit
could be significantly lower than guided Rs3.2bn. The base
manufactured product sales at $2.49m are continually affected by
inventory seizure at Michigan facility and partly due to voluntary
product recalls taken in March-09.
* Distributed inventories are maintained: Distributed inventories at
$46.4m include higher levels of inventory related to para-IV products to
support anticipated sales in near term. Higher sales of distributed
products have been supported by increase in accounts payable to Sun
Pharma which have increased from $84.2m to $114.9m. Accounts
receivables have also increased in 2Q10.
* “One-offs” exact nature still not clear: We estimate c. $33-35m
income from Forest deal in 2Q10. This includes $3-5m income from
reimbursement of certain litigation costs, $20m non-recurring income
and additional estimated $10m income in other income which was
higher in 2Q10. This was offset by one-off expenses which were onetime
separation payment of c. $0.9m to former CEO, legal fees related
to FDA issues and certain customer related costs in SGA and $7.4m
inventory charge for seizure by FDA. While the exact nature of all the
one-offs is not clear we believe that there is an overall net gain of c.
$20m in US business.
* Outlook includes higher reliance on distributed sales: Caraco
expects cessation to continue until it receives notification from experts
and FDA after assessing its compliance under Consent Decree.
However, company expects to maintain sales on back of distributed
products and products manufactured by third parties. In 1H10, 9 new
distributed products were launched. It recently launched ketorolac
tromethamine ophthalmic solution following Sun’s ANDA approval on
first day post expiry. The company is also considering site transfer for
some of the products under seizure. In addition in line with product
development, Caraco entered into agreement with Alkaloida Chemicals
in July 09, under which it will use product know-how and technology
from Alkaloida for development of its ANDAs and pay 10% royalty on
net sales.
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