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Sun Pharmaceutical second-quarter profit beats estimates on India growth

U.S. business remains stagnant

Stagnant sales in the U.S. resulted in India becoming a key growth driver for most drug makers.   © Reuters

MUMBAI (NewsRise) -- Sun Pharmaceutical Industries, India's largest drugmaker, reported a better-than-expected second-quarter net profit as strong growth at home and in several overseas markets helped offset a muted performance in the U.S.

Indian companies are contending with multiple challenges in the U.S., the world's biggest drug market, where prices have fallen amid increased approval rates for generics even as competition from new players intensified. Sun, backed by billionaire Dilip Shanghvi, has been steering its business away from cheap copycat generics to specialty drugs, as well as keeping a check on the costs. It is investing millions of dollars in new drugs in dermatology, ophthalmology, and oncology which have started to bear fruit.

Consolidated net profit for the quarter ended in September stood at 10.6 billion rupees ($150 million), compared with a loss of 2.7 billion rupees a year earlier. Analysts were expecting a net profit of 10.4 billion rupees, according to Refinitiv data.

The year-earlier quarter included an exceptional item of about 12.1 billion rupees related to a settlement agreement of an antitrust litigation in the U.S.

Total revenue from operations grew 17% to 81.2 billion rupees. Spending on research and development fell to account for 6.1% of sales, compared with 6.6% a year ago.

Sales in its U.S. formulations business, which accounts for 30% of the total revenue, remained unchanged from last year at $339 million. Stagnant sales in the U.S. resulted in India becoming a key growth driver for most drug makers. Sun's India revenue, which contributes 32%, surged 35%, while rest of the world reported a 49% jump.

"We continue to focus on cost savings and efficiency improvement to align our generic business with the changing industry dynamics," Managing Director Shanghvi said. "We continue to progress on building our global specialty business."

Shanghvi said the recently released long-term follow-up clinical data for its biologic drug Ilumya demonstrates sustained response for patients over a four-year period with very good safety profile.

In May 2018, Sun received the U.S. Food and Drug Administration's (FDA) approval for Ilumya, and in October the company launched the product in the U.S.

After entering licensing agreements with China Medical System Holdings to develop and commercialize two drugs -- Tildrakizumab used to treat psoriasis and Cyclosporine for dry eye -- in Greater China in June, the company Wednesday said Britain's AstraZeneca would distribute some of its cancer drugs in China.

On Wednesday, Sun's smaller rival Lupin reported a loss because of a one-time expense as well as slowing U.S. business, while another Indian drugmaker Cipla posted a 25% jump in profit.

Shares of Sun rose 3% in Mumbai trading on Thursday while the benchmark S&P BSE Sensex gained 0.5%.

--Dhanya Ann Thoppil

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