Lipodox, Taro effect wearing off ? Sun Pharma:: HDFC Securities

Lipodox, Taro effect wearing off ?
Sun Pharma has been on a roll for the last six
quarters reporting +40% EBITDA margin on the back
of (a) INR depreciation, (b) price hikes and strong
rebound in Taro’s performance (+45% EBITDA
margins), (c) benefits from Lipodox supplies (last 2-3
quarters). While we continue to remain positive on
Sun’s US business on its strong pipeline of 150 ANDAs
pending USFDA approval, Taro has been cautioning
investors on the sustainability of its performance on
account of increased competition.
Sun also gained from J&J’s Doxil shortage (J&J’s sole
supplier, Ben View Labs ran into manufacturing
issues and subsequently halted production) as the
USFDA allowed import of Sun’s Lipodox as
alternative to J&J’s Doxil until supply issues were
sorted out. Sun reported EBITDA margins of +45% in
the last 2-3 quarters largely driven by Lipodox
supplies to the US markets. We estimate sales of
~US$ 100 mn from Lipodox in 9MFY13 with gross
margins + 90%. This translates to 5.1% contribution
to sales but 11% contribution to EBITDA for FY13E.

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