Sun Pharma continues to face rough weather in the US markets. Loss of production at three Michigan units of its subsidiary, Caraco, as a result of the US FDA’s action, could hit the company’s profit before tax by 10-15 per cent, analysts estimate.
The FDA action will not impact drugs made by Sun Pharma in India and distributed by Caraco. Nevertheless, Caraco’s sales of manufactured products account for about a third of the revenues of around $337 million that Sun earns from the US markets. In the year to March 2009, these were approximately $112 million. Sales of Para IV products —those abbreviated new drug applications that face a patent challenge — fetch a larger amount, estimated at $150 million.
Given the uncertainty surrounding sales in the US, which accounts for around 35 per cent of Sun Pharma’s total sales, the company has withdrawn its sales guidance for the current year — it had indicated that revenues could grow between 13 per cent and 15 per cent over the Rs 4,272 crore posted last year.
Industry watchers are not sure about the full impact of the FDA’s action and whether sales of distributed products will be affected.
While Sun Pharma has around Rs 3,500 crore worth of cash on its books and should be able to overcome the regulatory issues, the uncertainty will continue to weigh down on the stock, which has corrected 15 per cent since the news broke to Rs 1,100 levels.