In the January-March quarter, Sun Pharmaceutical Industries Ltd received just one approval from the US Food and Drug Administration (FDA) to market a generic drug. In contrast, approvals seem to be pouring in during the current quarter. Five of Sun Pharma’s abbreviated new drug applications (ANDAs) to market generic drugs in the US market have been approved. Three of these were approved in the past five days. A steady flow of generic drug approvals will add to the company’s revenue. Of course, much depends on when Sun launches the drug, which is an uncertain event and is at times subject to the company’s readiness to launch, litigation and settlement agreements. Even so, a steady stream of ANDA approvals is a healthy development.

Also See | Reasons for lower growth in deposits with commercial banks

BEML profits to remain under pressure

On Tuesday, apart from announcing an ANDA approval, Sun also announced the settlement of a patent challenge case with Finnish pharmaceutical firm Orion Corp.Orion had sued Sun when it filed ANDAs for selling two of Orion’s drugs, Stalevo and Comtan, used to treat Parkinson’s disease, in the US market. Sun can now launch certain generic versions of Stalevo in April 2012, other versions in October 2012 and generic Comtan in April 2013. The US patents for these drugs are due to expire in October 2013. These two drugs had worldwide sales of €235 million (Rs1,335 crore today), but the share of the US market, which is relevant to this settlement, is not available.

Another unknown is the upfront payment that may have been received for the settlement. This may include reimbursement of litigation costs, which are typical in such settlements. But while these financial details have not been disclosed, it is clear that Sun will save on litigation costs thanks to the settlement.

Graphic: Ahmed Raza Khan / Mint

When Sun announced its guidance for fiscal year 2010-11, it estimated revenue to rise by 18-20% without specifying where this growth will come from. The Indian pharmaceutical market will be a key growth driver—after growing by about 17% in FY10, the market grew by 23.4% in April, according to IMS Health India. The Indian market accounts for about half of Sun’s sales.

The US market is also set to play an important role in its growth in the current year. Post-results, Sun’s share price has been rising and the improving outlook for its US generic business should help sustain this performance. Still, two events hold the key to a longer term improvement in its valuation: getting control over Taro Pharmaceutical Industries Ltd and the ability of its US subsidiary Caraco Pharmaceutical Laboratories Ltd’s to resolve compliance issues with FDA.

Close