With the verdict in its favour, the first round in the battle for Taro goes to the drug firm.
With the Tel-Aviv court ruling in its favour, the first round in the battle against Taro has clearly gone to Sun Pharma. Though the case could move to a higher court, Sun can now buy the shares held by the Levitt family giving it 65 per cent voting rights.
The Rs 3,290 crore drug major has been trying to acquire the Israel-based generics player Taro for some time now but the Levitt family was stalling the deal despite agreeing to sell out. Taro, which was in the red, has turned the corner this year with HY08 net profits estimated at US$ 20.6 million, an amount close to what it made in 2007. The stock now trades at $ 9.8 per share, above Sun’s offer price of $7.75.
Sun too posted splendid numbers in the June 2008 quarter, with net sales up a smart 66.4 per cent y-o-y to Rs 1,023 crore, the result of it being the exclusive seller of generic Pantoprazole (anti- ulcerant) and Ethyol (used for cancer treatment) in the US. The growth in the top line was also marked by a 174 per cent y-o-y increase in the export of formulations to Rs 531 crore.
Sales of formulations in the home market grew a tad slower at 17 per cent than what has historically been the case. But Sun nevertheless retained its number one position and has launched seven new products last quarter. Thanks to a sharp reduction in the cost of goods —a trend noticeable over the past three quarters—- Sun was able to achieve a 150 basis points y-o-y increase in operating profit margins to 52.5 per cent in the June quarter.
Industry watchers estimate that the gross margins for Pantoprazole and Ethyol could have been in the region of 95 per cent. Sun is looking to push its generic business with more launches and also with NDAs (new drug applications) through its US subsidiary Caraco.
However, the launch of Effexor XR tablets (anti-depressant) has been delayed due to a legal wrangle. Sun is expected to close FY09 with net sales of around Rs 4,000 crore and net profits of about Rs 1,600 crore. At the current price of Rs 1,484, the stock trades at 18.5 times its estimated FY09 earnings.
