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Asia300

Sun Pharma posts surprise fall in profit on rising U.S. competition, tax

MUMBAI (NewsRise) -- Sun Pharmaceutical Industries reported a surprise fall in quarterly profit, as increased tax expenses and rising competition in the U.S. weighed on India's largest drug maker by market value.

Consolidated net income for the quarter ended in December fell 5% to 14.72 billion rupees ($220 million) from 15.45 billion rupees a year ago, the company said in a statement on Tuesday. Analysts had expected a profit of 17.83 billion rupees.

Revenue grew more than 11% to 79.13 billion rupees. Tax expenses jumped over four times to 3.73 billion rupees in the quarter.

Sales in the U.S., the largest drug market in the world, grew 4%, while the U.S. unit Taro Pharmaceutical reported a 15% decline in the quarter. Sun's sales in the U.S. were aided by the launch of generic blood pressure drug Olmesartan and its combinations in October, the company said.

Analysts say Sun's U.S. sale is facing pressure from increasing competition for the generic version of Novartis's leukaemia drug Gleevec or Imatinib Mesylate, which it launched last February. Gleevec, which is patented by Swiss pharmaceutical giant Novartis, has annual sales of $2.5 billion in the U.S.

Sun and its smaller rivals have also been facing significant pricing pressure in the U.S. as several drug makers expand their footprint in the market. The Mumbai-based company has been working toward developing more specialty drugs in dermatology and ophthalmology as it seeks to skirt competition in the crowded generics market.

Smaller rival Dr. Reddy's Laboratories last week warned that growth in this quarter may be weak as a slow pace of new drug approvals in the U.S. crimps sales.

Meanwhile, Sun has come under fire from the U.S. Food & Drug Administration, over lapses and quality control issues at one of its local manufacturing plants.

In December 2015, Sun Pharmaceutical received a warning letter from the FDA, indicating manufacturing issues at its Halol plant in the western Indian state of Gujarat. Last December, the company said the regulator has raised more concerns about the plant in Halol, though it didn't give any details.

The FDA has identified nine violations at the plant following an inspection between Nov. 17 and Dec. 1, Reuters reported quoting a 14-page inspection report.

Mumbai-based Sun has also been grappling with regulatory and quality control issues at Ranbaxy's local plants, since acquiring it from Japan's Daiichi Sankyo for $4 billion. Ranbaxy has four plants in India that are banned from selling to the U.S.

The drug maker has also come under scrutiny from the U.S. government over the way it prices its drugs.

Shares of Sun lost 0.73% in Mumbai trading, while the benchmark S&P BSE Sensex closed 0.04% lower.

--Dhanya Ann Thoppil

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