Sun Pharma surprises with Q1 loss of Rs425 crore, first in 12 years
Mumbai: Sun Pharmaceutical Industries Ltd reported its first quarterly loss in at least 12 years after settling an antitrust case in the US amid a global downturn in the generic-drug business.
India’s biggest drugmaker, founded by billionaire Dilip Shanghvi, posted a total loss of Rs425 crore ($66.3 million) in the three months ended 30 June, the Mumbai-based company said in a filing on Friday.
Generic drugmakers have seen their U.S. businesses deteriorate as regulators there step up product approvals, ushering in new competition and prompting a steady erosion in prices. Consolidation among the biggest pharmacies has also limited manufacturers’ pricing power.
U.S. generic-drug giant Mylan NV lowered a long-targeted profit goal this week and Israel-based Teva Pharmaceutical Industries Ltd. said last week that it would pull back from 45 markets and cut jobs. Sun Pharma’s Israel-based unit Taro Pharmaceutical Industries Ltd. said it expects pricing pressure to continue.
Sun Pharma paid Rs951crore to plaintiffs including Canadian rival Apotex Inc. in July to settle a U.S. antitrust lawsuit over sleep-disorder drug modafinil, according to the filing. Excluding the settlement, Sun’s profit was Rs530 crorer, down 74% from the same period last year amid slower sales in both India and the U.S.
Shanghvi said in a press release that the company’s first-quarter performance “was not good,” citing increased investments, disruptions in India due to the introduction of a new nationwide sales tax, and pricing challenges in the US market for generic drugs. “We expect our performance to gradually improve in the second half of this year,” he said.
Sun Pharma is particularly exposed to a squeeze on prices in the U.S., which accounts for about half its revenue. Its ability to offset falling prices with new products is hampered by a Food and Drug Administration sanction, in place since December 2015, over manufacturing deficiencies at its factory at Halol in western India. The company has been unable to shake off the sanction despite costly remediation efforts.
Lack of Clarity
Sun’s U.S. sales were down 425 from the previous year to $351 million, though the earlier period included exclusive rights to sell generic versions of Novartis AG’s blockbuster cancer drug Gleevec that expired in July of last year, the company said in its press release.
“Going forward they will face problems because in the U.S. market there will not be clarity for at least another two quarters” as pricing pressures will remain, Ranjit Kapadia, an analyst at Centrum Broking Pvt., said before the results announcement. “The U.S. FDA is giving approvals much faster so smaller companies are coming into the fray and competing with larger companies.”
As prices for simple generic drugs fall in the U.S. Sun Pharma has been investing in the development of more complex therapies as well as completely new ones to fend off competition.
The company’s leading candidate is a novel treatment for the skin condition psoriasis, which it has said should be ready in the year ending 31 March 2019. The treatment could provide a valuable new revenue stream for Sun Pharma, according to Kapadia. Bloomberg
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