Sun Pharma's third-quarter profit slumps 75% on lower sales, U.S. tax changes
India's biggest drug maker says U.S. pricing environment `challenging'
MUMBAI (NewsRise) -- Sun Pharmaceutical Industries reported a 75% slump in third-quarter net profit, as declining sales and a one-time expense related to changes in tax laws in the U.S. weighed on India's largest drug maker.
Consolidated net profit for the quarter ended in December stood at 3.65 billion rupees ($57 million), compared with 14.72 billion rupees a year earlier. Analysts surveyed by Reuters had expected the company to report a net income of 9.12 billion rupees.
Revenue dropped more than 16% to 66.53 billion rupees. The latest quarter had an exceptional expense worth 5.13 billion rupees due to re-measurement of deferred tax assets after changes in the tax laws in the U.S., the company said.
Sales of formulations in the U.S. declined 35% to $328 million, as the year-earlier period included six months of exclusive sales of generic version of Novartis' leukemia drug Gleevec and generic sales of hypertension drug Olmesartan and its combinations. The U.S. accounted for a third of Sun's total revenue.
Sun said its U.S. unit Taro Pharmaceutical reported an 87% plunge in net profit after sales fell 30% due to the overall pricing pressure in the world's largest generics drug market. Sun holds a 69% stake in Taro, which contributes more than 20% of the parent's sales and more than 40% of its consolidated profit.
The pricing environment in the U.S. remains "challenging," Dilip Shanghvi, managing director of Sun, said in the statement.
Sun and smaller rivals are grappling with falling drug prices in the U.S., where the Food and Drug Administration has expedited its approval rate for generics, paving the way for increased competition from new players. A rising number of retail pharmacies in the U.S. are joining hands to gain leverage in buying generic drugs in bulk, pushing prices down further.
While most Indian companies sounded optimistic of the pricing environment recovering in the U.S., Teva Pharmaceutical Industries, the largest generic drug maker in the world, last week warned that a recovery may be unlikely this year as competition escalates.
To skirt the competition in the crowded U.S. generics market, most Indian drug makers, including Sun, have been working toward developing more specialty drugs.
Sun's specialty business received a fillip after the U.S. drug regulator accepted its new drug application for OTX-101 to treat dry-eye disease in December. "We will continue to evaluate opportunities in the specialty segment to further enhance this business," Shanghvi said.
Sun is also struggling to resolve regulatory issues at one of its plants in India. In December 2015, the FDA issued a warning letter to Sun raising concerns about the manufacturing practices at its Halol plant in Gujarat state.
Most Indian drug makers are grappling with regulatory issues amid rampant violation of FDA norms on manufacturing standards. The FDA has issued warning letters to second-ranked Dr. Reddy's Laboratories and third-largest Lupin, citing quality issues at some of their plants.
Ahead of the earnings, shares of Sun closed down 2.5% in Mumbai trading, while the benchmark S&P BSE Sensex lost 0.4%.
--Dhanya Ann Thoppil