Sun Pharmaceutical Industries has received major setback due to lower sales in US during the second quarter ended September 2017. Its consolidated net profit declined by 59.4 per cent to Rs.1,002 crore from Rs.2,471 crore in the corresponding period of last year as its net sales of formulations in the US declined sharply by 46.5 per cent. Its consolidated net sales declined by 15 per cent to Rs.6,590 crore from Rs.7,749 crore. Though US sales declined, its sales in domestic and emerging markets improved. With lower net profit its EPS declined to Rs.3.80 as against Rs.9.3 in the last year.
Its total formulation sales declined by 16.3 per cent to Rs.6,177 crore from Rs.7,378 crore. The formulation sales in the US declined by 46.5 per cent to Rs.1,986 crore during the second quarter from Rs.3,714 crore due to pricing pressure and US FDA actions regarding cGMP. The US sales contributed 30 per cent to its net sales as against 48 per cent in last period. The sales in Indian market improved by 10.6 per cent to Rs.2,221 crore from Rs.2,009 crore and contributed to 34 per cent to its sales. It launched 14 new products in domestic market. The sales in emerging market moved up by 11.7 per cent to Rs.1,258 crore from Rs.1,126 crore. Its sales in RoW went up by 34.7 per cent to Rs.711 crore from Rs.528 crore. The sales of bulk drugs improved by 5.7 per cent to Rs.388 crore from Rs.367 crore.
Dilip Shanghvi, managing director, said, “A challenging US generic pricing environment coupled with continued investments in building our global specialty business has impacted our Q2 performance. We expect our performance to gradually improve in the second half of this year. I would also like to welcome Vivek Chaand Sehgal who has joined us as an independent director as of today. Sehgal is a very successful entrepreneur and is the Chairman of Samvardhana Motherson Group and Motherson Sumi Systems Ltd.”
Sales for first half last year included the benefit of generic Imatinib exclusivity which expired in July-2016. Besides Imatinib, the overall pricing pressure in the US generics market also impacted the YoY growth. Taro’s net sale for the first half declined by 28 per cent during first half to US$ 331 million and its net profit by 54 per cent to $ 107 million.
For the first half, sales were US$ 363 million, up by 13% over first half last year. While the growth was broad-based across various markets, it was partly boosted by the consolidation of the Biosintez acquisition in Russia. The sales in emerging market were US$ 226 million, up by 39% over first half last year. The growth was partly boosted by the consolidation of revenues from the acquisition of 14 brands from Novartis in Japan.
Sun Pharma’s API business imparts benefits of vertical integration for its formulations business. It continue to increase the API supply for captive consumption for key products. For the first half, API sales were at Rs.697 crore, down by 17 per cent over first half last year.
Its consolidated R&D expense for second quarter ended September 2017 declined by 10.4 pr cent to Rs.511 crore from Rs.570 crore in the similar period of lat year. This worked out to 7.7 per cent of sales. The company has a comprehensive product offering in the US market consisting of approved ANDAs for 422 products while filings for 136 ANDAs await US FDA approval, including 15 tentative approvals. For the quarter, 4 ANDAs were filed and 3 approvals were received. Additionally, the pipeline includes 37 approved NDAs while 4 NDAs await US FDA approval.
The net sales for the first half declined by 19 per cent to Rs.12,757 crore from Rs.15,756 crore in the same period of last year due to lower formulation sales in US which declined by 45.4 per cent to Rs.4,251 crore from Rs.7,785 crore. Net profit for the first half declined by 86 per cent to Rs.679 crore from Rs.4,739 crore due to settlements with certain plaintiffs related to the Modafinil antitrust litigation in the US, with the settlement amounting to Rs.951 crore reported in Q1FY18.