Sun Pharmaceutical Industries, a Rs.27,200 crore plus leading Indian pharma giant, has suffered major setback during the second quarter ended September 2015 on account of lower sales in US, exchange rates and supply constraints. The consolidated net profit declined sharply by 46 per cent to Rs.1,107 crore from Rs.2,050 crore in the corresponding period of last year.

Its consolidated net sales declined by 14.7 per cent to Rs.6,803 crore from Rs.7,979 crore and its other operating income declined by 42.9 per cent to Rs.34 crore from Rs.60 crore. However, its other income increased to Rs.191 crore as against expenditure of Rs.31 crore. Its EBIDTA declined by 55.8 per cent to Rs.2,125 crore from Rs.4,808 crore. With poor performance, its EPS declined to Rs.4.6 from Rs.8.5 in the last period. The consolidated results include the interim financial information of 54 subsidiaries, a partnership firm and 3 jointly controlled entities for the half year.

The Sun Pharma scrip declined by 6 per cent in the morning session today to Rs.756 on BSE as against its previous days close of Rs.803.70. The scrip touched to its yearly highest level at Rs.1200.70.

Sun's US formulation sales declined sharply by 28 per cent to US$510 million due to competitive pressure on some products and temporary supply constraints arising from remediation efforts at the Halol facility. It had benefited significantly from the 180-day exclusivity on Valsartan tablets in the US resulting in a higher base. The US formulation contributed for 48 per cent of total sales. Its sales in emerging market also declined by 16 per cent to $ 140 million and accounted for 13 per cent of total sales. Its sales in rest of the world also declined by 30 per cent to $76 million. A conscious effort at reducing the participation in non-remunerative businesses has contributed to de-growth in the business.

Its formulation sales in domestic market increased marginally by one per cent to Rs.1,819 and accounted for 26 per cent of total sales. Sales growth was adversely impacted due to conscious efforts to control overall inventory with the trade. In addition, sales in the acute segment were lower due to withdrawal of bonus offers and a relatively soft season for the acute segment. Its API sales increased by 13 per cent to Rs.315 crore.

Its R&D expenditure reached at Rs.498 crore during the second quarter which worked out to 7.3 per cent of sales. This includes significant investments on account of funding the clinical development of MK-3222, the IL-23 monoclonal anti-body in-licensed from MSD (US). The company received 4 approvals from US FDA and its cumulative filings reach at 445 ANDAs while filings for 154 products await US FDA approval.

Dilip Shanghvi, managing director, said, “Our performance for the quarter and first half FY16 has been impacted by lower sales growth, volatile currency movements and supply constraints. Nonetheless, we continue to invest significantly in enhancing our specialty and complex generics pipeline. Integration of Ranbaxy is progressing well and while some of the costs have been incurred, the benefits will be visible going forward. We also continue to evaluate opportunities to expand our global foot print.

For the first half ended September 2015, Sun Pharma's consolidated net sales declined by 6.8 per cent to Rs.13,329 crore from Rs.14,296 crore in the similar period of last year. Its net profit declined sharply by 51.3 per cent to Rs.1,586 crore from Rs.3,255 crore. The company has shown exceptional expenditure of Rs.685 crore during the first half as against Rs.238 crore. Exceptional item represents charge on account of impairment of fixed assets and other related costs and write down of the carrying value of goodwill on consolidation. This charge has arisen on account of the integration and optimisation exercise being carried out for certain manufacturing facilities. Its equity capital increased to Rs.240.64 crore from Rs.207.12 crore as the company issued 72,789 equity shares of Re 1 each under employee stock options. Its reserves and surplus increased by 9.8 per cent to Rs.27,869 crore from Rs.26,383 crore.

The US formulation sales during the first half declined by 12 per cent to $427 million. However, its domestic sales of formulations increased by 6 per cent to Rs.3,602 crore. Its sales in emerging markets declined by 16 per cent to $273 million and that in RoW declined by 19 per cent to $167 million. Its API sales increased by 21 per cent to Rs.586 crore in the first half.