Sun Pharma’s Q2 net profit falls 59.7% on weak US biz
Net profit declines to Rs1,001.79 crore from Rs2,487.89 crore a year ago
Sun Pharmaceutical Industries Ltd, India’s largest drug maker, reported a 59.7% decline in fiscal-second quarter profit because of weak US sales.
Net profit declined to Rs1,001.79 crore in the three months ended 30 September from Rs2,487.89 crore a year ago. Sales fell 15% to Rs6,590.06 crore.
A Bloomberg poll of 22 analysts had estimated Sun Pharma’s September profit at Rs800.40 crore and sales at Rs6,803.90 crore.
“A challenging US generic pricing environment coupled with continued investments in building our global specialty business has impacted our Q2 performance,” Dilip Shanghvi, managing director of the company, said in a statement.
Sun Pharma invested Rs511 crore, or 7.7% of its sales, in research and development (R&D) in the September quarter.
This includes investments on account of funding the clinical development of its global specialty pipeline, the company said.
In a conference call with analysts, Shanghvi said a delay in the approval of certain important products in the US due to regulatory issues at the company’s manufacturing unit in Halol, Gujarat, has also affected US business.
The US Food and Drug Administration (FDA) had issued a warning letter to the Halol unit in December 2015 for violation of good manufacturing practices. Since then, new product approvals have been held back by the regulator. “There are no new updates on Halol. We are awaiting re-inspection from the US FDA. Site transfers for some products from the facility ongoing,” Shanghvi said.
The company’s sales in the US, which contributed 30% to the total revenue, fell 44% to $309 million in the quarter due to pricing pressure in existing products and lower contribution from generic of cancer drug Gleevec.
In the same period last year, Sun Pharma had benefited from marketing exclusivity for Gleevec generic.
Sun Pharma filed four abbreviated new drug applications (ANDAS) in the US during the quarter.
In all, the company has approval for 422 generic drugs in the country, while filings for 136 products await approval from the US FDA.
Sales in India rose 11% from a year ago to Rs2,221 crore. The domestic market accounted for 34% of the company’s total sales.
Sales in emerging markets grew 16% to $196 million and in rest of the world markets jumped 40% to $111 million.
While Shanghvi maintained a forecast of a single-digit decline in revenue in fiscal year 2017-18, he cautioned that the current business environment in the US is challenging because of consolidation in the distribution channel.
“I was expecting that Sun Pharma will lower its topline guidance to a double-digit decline but it did not. I am not very confident on the recovery in US business this year given that the company is not getting many approvals and there is price erosion in existing products. The specialty portfolio is not contributing much. The near-term positive trigger for the company remains clearance of Halol facility by the US FDA,” said Amey Chalke, an analyst at HDFC Securities.
On Tuesday, shares of Sun Pharma fell 1.2% to Rs526.15 on BSE, while the exchange’s benchmark Sensex closed 0.3% lower at 32,941.87 points.
Sun Pharma MD Dilip Shanghvi said a challenging US generic pricing environment coupled with investments in building the firm’s global specialty business affected Q2 performance.