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Sun Pharmaceuticals: Taro annual report takeaways
` US sales account for 84% of Taro revenues in 2011 versus 78% in 2010
` EBITDA margin shoots up to 44% in 2011, three sources of this increase
Sun Pharmaceuticals (SUNP)
Pharmaceuticals
Taro annual report takeaways. 2011 was marked by outperformance in US which led
to 62% of PBT at Taro being generated by North American operations. While EBITDA
margin shot up to 44% in 2011, we consider the (1) 13% drop in SG&A expenses to
sustain, and (2) expect only gradual increase in R&D expenses, down 15% in 2011 to
6% of sales. We highlight that every quarter of outperformance of margin at 50% at
Taro (versus our FY2013E estimate of 36%) leads to 3% increase in SUN’s FY2013E
EPS. ADD; target price Rs600 (unchanged).
US sales account for 84% of Taro revenues in 2011 versus 78% in 2010
In 2011, US accounted for 84% of sales, up from 78% in 2010, an increase of US$119 mn due to
(1) 5% increase in overall sales volume, (2) new product launches such as Imiquimod cream and
increased sales volume of select products such as calcipotriene ointment and carbamezepine
tablets contributed US$35.2 mn, and (3) increase in selling prices of select products. Sales in
Canada remained largely flat yoy in 2011, while sales in Israel and other markets were down by
US$6 mn due to decrease in sales of warfarin. Warfarin tablets, which accounted for 13% of Taro
sales in 2009, now accounts for less than 10% of sales.
The outperformance in US led to 62% of PBT in 2011 being generated from nondomestic regions,
primarily US/Canada, versus 50% in 2010 and 24% in 2009.
EBITDA margin shoots up to 44% in 2011, three sources of this increase
EBITDA margin shot up to 44%% in 2011 from 27% in 2010 due to (1) increase in selling prices
in US which resulted in gross profit margin at 65% in 2011, up from 59% in 2010, (2) decline in
R&D expenses to 6% from 9% in 2010. This decrease was mainly due to reduction in the number
of clinical trial studies performed in 2011, and (3) lower SG&A expenses at 19% in 2011, down
from 27% in 2010. While selling and advertising costs remained flat in 2011, general and
administrative expenses declined 25% in 2011 over 2010. This was mainly due to (1) reduction in
legal fees post resolution of litigation between SUN and Taro in September 2010, and (2) lower
severance costs in 2011post job termination of certain Taro executives in 2010.
Since Taro has a rather thin pipeline with only 24 ANDAs pending approval at the US FDA, we
expect R&D expenses to gradually move up to 10% of sales. We factor in EBITDA margin of 36%
for Taro in our FY2013-14E estimates versus 44% in 2011 and 53% in 4Q2011. We highlight
that every quarter of outperformance of margin at 50% at Taro leads to 3% increase in
SUN’s FY2013E EPS. However, with potential return of competition (for ex Apotex into
dermatology, recently gained approval for Imiquimod), we remain cautious and factor in lower
margin.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily11042012.pdf
Sun Pharmaceuticals: Taro annual report takeaways
` US sales account for 84% of Taro revenues in 2011 versus 78% in 2010
` EBITDA margin shoots up to 44% in 2011, three sources of this increase
Sun Pharmaceuticals (SUNP)
Pharmaceuticals
Taro annual report takeaways. 2011 was marked by outperformance in US which led
to 62% of PBT at Taro being generated by North American operations. While EBITDA
margin shot up to 44% in 2011, we consider the (1) 13% drop in SG&A expenses to
sustain, and (2) expect only gradual increase in R&D expenses, down 15% in 2011 to
6% of sales. We highlight that every quarter of outperformance of margin at 50% at
Taro (versus our FY2013E estimate of 36%) leads to 3% increase in SUN’s FY2013E
EPS. ADD; target price Rs600 (unchanged).
US sales account for 84% of Taro revenues in 2011 versus 78% in 2010
In 2011, US accounted for 84% of sales, up from 78% in 2010, an increase of US$119 mn due to
(1) 5% increase in overall sales volume, (2) new product launches such as Imiquimod cream and
increased sales volume of select products such as calcipotriene ointment and carbamezepine
tablets contributed US$35.2 mn, and (3) increase in selling prices of select products. Sales in
Canada remained largely flat yoy in 2011, while sales in Israel and other markets were down by
US$6 mn due to decrease in sales of warfarin. Warfarin tablets, which accounted for 13% of Taro
sales in 2009, now accounts for less than 10% of sales.
The outperformance in US led to 62% of PBT in 2011 being generated from nondomestic regions,
primarily US/Canada, versus 50% in 2010 and 24% in 2009.
EBITDA margin shoots up to 44% in 2011, three sources of this increase
EBITDA margin shot up to 44%% in 2011 from 27% in 2010 due to (1) increase in selling prices
in US which resulted in gross profit margin at 65% in 2011, up from 59% in 2010, (2) decline in
R&D expenses to 6% from 9% in 2010. This decrease was mainly due to reduction in the number
of clinical trial studies performed in 2011, and (3) lower SG&A expenses at 19% in 2011, down
from 27% in 2010. While selling and advertising costs remained flat in 2011, general and
administrative expenses declined 25% in 2011 over 2010. This was mainly due to (1) reduction in
legal fees post resolution of litigation between SUN and Taro in September 2010, and (2) lower
severance costs in 2011post job termination of certain Taro executives in 2010.
Since Taro has a rather thin pipeline with only 24 ANDAs pending approval at the US FDA, we
expect R&D expenses to gradually move up to 10% of sales. We factor in EBITDA margin of 36%
for Taro in our FY2013-14E estimates versus 44% in 2011 and 53% in 4Q2011. We highlight
that every quarter of outperformance of margin at 50% at Taro leads to 3% increase in
SUN’s FY2013E EPS. However, with potential return of competition (for ex Apotex into
dermatology, recently gained approval for Imiquimod), we remain cautious and factor in lower
margin.
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