Mar 26, 2002|
Sun Pharma: Will Caraco turnaround?
Sun Pharma's stock has moved up in last couple of months mainly on the back of developments in its US vehicle, Caraco Pharma. The company's investment in this subsidiary has been widely described as a key area of concern. With new US product approvals gaining pace, the management is expecting this subsidiary to breakeven in the current year. However, it seems to be too early to decide on the company's turnaround.
First, why the concern? As against Sun Pharma's investment of US$ 12.8 m (US$ 7.5m towards equity and US$ 5.3m towards debt) in this affiliate, Caraco has accumualated deficit in excess of US$ 56 m, with negative networth of US$ 23 m. Additionally, Sun Pharma's contigent liability in the form of bank guarantee's for Caraco is in excess of US$ 15m. Even in 2001, Caraco continued to make substaintial operating losses, though sales recorded a sharp jump.
Caraco: Operating losses continue...
|Interest Expense (Net)
Though Caraco's sales improved considerably on the back of 3 ANDA approvals received in last year, the company could not manage to come out of operational losses. Further, rising interest expense, inspite of resheduling/ renegotiating loan agreements, remains a key area for concern.
Caraco currently has 6 approved product ANDAs (Abbreviated New Drug Application) and 4 ANDA's are in the pipeline. Most of these product approvals were received towards the end of year and these would help boost revenues of Caraco in the current year. Caraco's stock recently gained attenttion for receiving tentative approval for generic version of Glucophage, which is a multi billion diabetic product from Bristol Myers with sales currently pegged at US $ 1.8 bn annually.
Though Glucophage is a blockbuster product, we do not expect major revenues for Sun Pharma. This is due to the fact that there would be several other generic companies, marketing the same product. Goldline Inc., which is a subsidiary of generic major Ivax, has already received approval for marketing the drug, a week before Sun Pharma and there are atleast 5 other companies whose application is pending. Further, Bristol Myers, the originator for the product, has already launched once a day formulation for Glucophage and is aggressively trying to switch patients to this new delivery system.
We believe that though Caraco's business has picked up monentum, it would be too early to comment whether the company would breakeven in the current year, as targeted by the management. Considering, that all the product approvals received by the company till date are non exclusive and comparatively small in size, breakeven seems difficult. In the meantime, Sun Pharma's stock price is expected to move inline with developments over Caraco Pharma.
More Views on News
Aug 14, 2017
A challenging environment and one-time expense pushes Sun Pharma into a loss in the first quarter.
Aug 14, 2017
GST impact coupled with price erosion in US leads to lower profits for the quarter.
Aug 8, 2017
Profits plunge due to higher raw material costs.
Jun 16, 2017
Here's what you can expect from The 5 Minute Wrapup in the coming months and years.
Jun 23, 2017
Net Profit lower due to exceptional items in the previous year.
More Views on News
Aug 17, 2017
A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.
Aug 10, 2017
Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407