M NEYBEE June 2008

KNOW VENTURE KNOW GAIN

INDUSTRY: PHARMA RESEARCH COMPANY: SUN PHARMA ADVANCED RESEARCH COMPANY

BSE code : 532872

Face Value : 1/- Recommendation: BUY
M.Cap (mn) : 18837
Registered Office: 52 week H/L : 186/67
17 B Mahal Industrial Estate, Eq. Share in mn : 207
Mahakali Caves Rd Andheri (E), B.V :3
EPS (TTM) : (0.25) CMP : 91
Mumbai - 400 093
Price/ BV : 30
Price/ EPS :- Target Price : NA
Website: www.sunpharma.in Dividend Yield : -
% of Shares Research Analyst
Dematerialised : 99.03 Riken Mehta

SENSEX SPARC HIGHLIGHTS OF SPARC

25000 200
20000 • Sun Pharma Advanced Research Company Ltd. (SPARC), created
150
15000 after demerger of Sun Pharma Industries (SPI) is an international
100 research based company. Company has explored following drugs
10000
5000 50 discovery in pharma:
0 0 • NCE (Allergy): SUN-1334H (Anti-allergy), SUN-461 (Anti-
Inflammation-Asthma & COPD), SUN- 44 (Prodrug-Gabapentin) &
SUN- 9 (Prodrug- Muscle Relaxant).
• NDDS Technology: Dry powder Inhalers (DPI), Nanoemulsion,
Gastric retention systems(GRID), Matrix system (Wrap-matrix) &
Source: www.bseindia.com Biodegradable injections/implants.
• In the year 2000, SPI used its surplus from generic business to build
a research centre for drug discovery with a proficient team of 160
scientists. SPARC plans to fortify its team by recruitment & tally
would reach to 200 people in next 3-4 years.
Share Holding% as on Mar 08 • SPARC proposes to manufacture drugs which are better than its
peers & with no consequences on human body. This provoked
Promoters SPARC to achieve low risk profile by marketing products in India first
17.04 in semi-regulated market followed by regulated market.
FII, MF, Insurance • A capex of 60-75mn US$ is allotted for R&D. SPI would contribute
4.35
50mn US$ while remaining chunk will get funded by licensing deals.
Company has already struck one deal in the last quarter due to sale
Corporate Bodies
of technology & one can expect at least 2 deals in the next year.
14.83
63.78 • SPARC posted 24.52% OPM in the last quarter. It was mainly
Public contributed due to sale of its technology. However, previous 2
Source: Bseindia quarters bottom line ended in red.

MONEYBEE SECURITIES PVT. LTD. ~ RESEARCH REPORT ~ SUN PHARMA ADVANCED RESEARCH COMPANY LTD. Page 1
 • One can expect little or no revenue generation in the preliminary
Details Q.E Q.E Q.E
stages since discovery of drug requires higher capital expenditure
(Figures in mn) Mar08 Dec07 Sep07
coupled with longer gestation period. Company would incur profit
Sales 244.84 118.73 11.05 once the products are out licensed & it would generate higher
EBDITA 151.11 29.19 (116.7) returns once the product beats its peers in terms of price &
EBDITA % 62 25 - popularity.
DEPRECIATION 3.6 3.14 2.96 • Company would reap immense benefits from its successful launch
INTEREST - - - of duo compound SUN-461 along with its DPI technology in the
TAX 2.84 0.14 0.19 market. Pre-clinical & Acute toxicity studies in SUN -461 are ongoing
NPAT 145 26 (120) & Phase I Human studies exposure is likely to begin in 2008. DPI is in
advanced stage & is likely to be launched in semi-regulated markets
EPS 0.71 0.13 -
in 2009.
• SPARC Ke Side-effects: SPARC operates in R&D segment which
involves huge investment. R&D segment is plagued with large
collapse rates, launch of superior products by its peers & delay in
proposed plans will augment gestation period further. Also,
FINANCIALS OF SPARC (RS IN MN) potential investors are hard to find given the high peril nature of the
business,
400 • We expect company to do well in next 2-3 years offering huge
350 upside potential for investors. BUY
300
250
200
150 VALUATION
100
50
0 • SPARC is involved in Pharma Research & Development. Companies
-50
in this segment are not comparable since SPARC is only listed
company. Sound management team, proven track record of parent
-100
2007-08 company, debt-free, quality of pipeline & low risk high return profile
Net Sales makes an attractive bet at Rs. 90.
375
Other
1
Income
Gross Profit -33
Depreciation 13
Interest 0
Tax 3
Net Profit -49
EPS 0

MONEYBEE SECURITIES PVT. LTD. ~ RESEARCH REPORT ~ SUN PHARMA ADVANCED RESEARCH COMPANY LTD. Page 2
 SPARC NCE PROJECT

Product Therapeutic Treatment of CGMS Opportunity Challenge Current status

SUN- Anti-allergy Allergic 5.5 bn Patents expiring on Justify premium on Phase I over
1334H rhinitis/Urticaria competing products competing products Phase II ongoing in US
SUN-461 Anti-inflammatory Asthma & 8 bn Results comparable Side-effect profile Phase I human studies
COPD to corticosteroids superior exposure begin in 2008
SUN-44 Neuropathy Seizure/CNS 1.2 bn Higher blood level - Phase I human studies
related disorder Results positive exposure begin in 2008
SUN-09 Muscle relaxant Muscle 0.2 bn No. of patients under - Studies ongoing
Spasticity treatment 1.5mn

CGMS: Current Global Market size

SPARC NDDS PROJECT

Product Treatment of Benefits Current status

DPI Asthma & COPD Give visual, audible & tactile feedback Semi-regulated markets launch: 2009
Regulated markets NDA filing: 2011
Baclofen GRS Muscle Spasticity Ease of switchover from India: Completed Phase I,II & III clinical status &
IR (3 times/day) to GRS (once-a-day) approved; IND filing: 2008
Biodegradable Patient trauma & No local anesthetic required while GnRH Analogue (India): Phase I in 2008
Implants/Injection pain delivering drug; Injection less painful Somatostatin Analogue (India): Phase I ongoing

MONEYBEE SECURITIES PVT. LTD. ~ RESEARCH REPORT ~ SUN PHARMA ADVANCED RESEARCH COMPANY LTD. Page 3
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CHETAN NAGDA, Head – Research

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