Sun Pharma’s Q2 net profit falls 59.7% on weak US biz

Mint ST - - CORPORATE - BY ISHA TRIVEDI isha.t@livemint.com MUM­BAI

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.

BLOOMBERG

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.

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