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Sun Pharmaceutical profit beats estimates, helped by tax gain

Lower raw material costs also boost quarterly net income

Sun Pharmaceutical Industries' consolidated net profit for the quarter ended in March stood at 13.09 billion rupees, compared with 12.23 billion rupees a year earlier.   © Reuters

MUMBAI (NewsRise) -- Sun Pharmaceutical Industries, India's largest drug maker, reported a better-than-expected 7% increase in fourth-quarter net profit, driven by a tax gain and lower raw material cost.

Consolidated net profit for the quarter ended in March stood at 13.09 billion rupees ($193 million), compared with 12.23 billion rupees a year earlier. Analysts surveyed by Reuters had expected the company to report a net income of 9.47 billion rupees.

Revenue fell more than 2% to 69.77 billion rupees, weighed by declining sales in the U.S. amid sustained price competition. The quarter had exceptional income worth 2.59 billion rupees from a tax write-back. Material expenses fell 39% to 11.2 billion rupees.

Sun and smaller rivals are grappling with falling drug prices in the U.S., where the Food and Drug Administration has been expediting its approval rate for generics and 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.

In the past one month, Sun's smaller rivals Dr. Reddy's Laboratories and Lupin have also reported slumping sales in the U.S. 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.

In a major boost to Sun's specialty business, the U.S. drug regulator in March approved its first biologic drug Ilumya, used for the treatment of psoriasis.

However, Sun is still struggling to resolve regulatory issues at one of its plants in India, which had come under the regulatory scanner in December 2015 for violation of manufacturing standards. 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.

Ahead of the earnings, shares of Sun closed 1% higher in Mumbai trading, while the benchmark S&P BSE Sensex rose 0.8%.

--Dhanya Ann Thoppil

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