MUMBAI (NewsRise) -- Sun Pharmaceutical Industries reported a more than 26% slump in third-quarter profit as weak U.S. sales and shrinking foreign exchange gains damped the top Indian drugmaker's performance.
Indian pharmaceutical companies are contending with a difficult operating environment in the U.S., where prices have fallen amid increased approval rates for generics while competition intensified. Sun, backed by billionaire Dilip Shanghvi, has been steering its business away from cheap copycat generics to specialty and branded drugs, as well as keeping a check on its costs and diversifying into new markets such as China. It is investing millions of dollars in new drugs in dermatology, ophthalmology, and oncology.
Consolidated net profit for the quarter ended in December stood at 9.14 billion rupees ($129 million), compared with 12.4 billion rupees a year earlier. Foreign exchange gains in the quarter slumped to 818 million rupees from 2.27 billion rupees a year ago.
Total revenue from operations grew 5.3% to 81.5 billion rupees, Sun said in a statement.
Sun's sales in its U.S. formulations business, which accounts for nearly a third of the total revenue, fell 3% to $350 million, while emerging markets declined 4%. However, the India branded formulations business, which contributes another third, grew 13%.
"For the international business, we continued our efforts to enhance our portfolio in new markets by entering into a licensing agreement with AstraZeneca in China for some of our novel oncology products," Managing Director Shanghvi said. "We continue to enhance our global specialty business which is gradually becoming a meaningful growth engine."
After entering licensing agreements with China Medical System Holdings to develop and sell two drugs -- Tildrakizumab used to treat psoriasis and Cyclosporine for dry eye -- in greater China in June, Sun had in November tied up with Britain's AstraZeneca to distribute some of its cancer drugs there.
Meanwhile, Sun's smaller rival Lupin reported a surprise quarterly loss as the company took one-time impairment charges related to some brands in the U.S. and closed a unit in Japan. Lupin posted a loss of 8.35 billion rupees, while analysts were expecting the company to report a profit of 2.35 billion rupees, according to a Refinitiv poll.
The performance was significantly affected by exceptional events, including the impairment of the portfolio of drugs in Gavis, a U.S. company it bought nearly five years ago, and the sale of Japanese unit Kyowa, Nilesh Gupta, managing director of Lupin, said in a statement.
He said quality is the "topmost" priority for the company and that it is making "steady progress on remediation measures across our manufacturing footprint."
The drugmaker has five of its plants under the FDA's enforcement action. The U.S. regulator has slapped warning letters on the company's plants in the western Indian state of Goa, two in the central state of Madhya Pradesh and Somerset in the U.S. Last month, the company received an official action indicated status, a precursor to warning letter, for its facility in the western state of Maharashtra.
On Wednesday, Cipla, another Indian drugmaker, reported a 5.7% rise in third-quarter profit that missed expectations on the back of disappointing U.S. sales.
Shares of Sun gained 1.1% in Mumbai trading on Thursday, while Lupin lost 0.3%. Cipla shares lost 1.6% and the benchmark S&P BSE Sensex gained 0.4%.
--Dhanya Ann Thoppil