Sun Pharma: hopes pinned on FDA clearance for Halol plant
The going continues to be tough for Sun Pharmaceutical Industries Ltd. Earlier last week, its US unit Taro Pharmaceutical Industries Ltd reported lower-than expected sales, declining sequentially by 11.6% to $234 million. Competition and its effect on drug prices are affecting sales growth. Sun Pharma’s own sales growth in the US market rose 19% sequentially to $375 million.
Ex-Taro US sales growth benefited from the sales of generic Gleevec, a cancer drug, with a 180-day exclusivity that was launched on 1 February. Exclusivity has ended now and the benefits from this launch will taper, as competition leads to lower prices. Also, Sun Pharma’s management said the $35 million of revenue recorded in this quarter is a one-time income.
Overall, Sun Pharma’s gross sales rose 22.7% over a year ago to Rs.8,007 crore, with the US markets leading growth by 31.7% mainly due to the generic Gleevec. A weaker rupee, down by 5.5% over a year ago, would have also helped growth look better. Having completed its Halol remediation, the company is waiting for the US Food and Drug Administration (USFDA) to inspect the plant.
Supplies of products that had been affected have been restored. However, the US market continues to remain a difficult one, with most companies indicating pricing pressure affecting sales. Sun Pharma’s performance in this market depends on its Halol plant getting an okay from USFDA, which will open the door to more approvals from this plant.
In India, sales grew 7.5%, with the effect of price controls and bans on combination drugs affecting industry sales growth. While Sun’s growth in the countries it classifies as emerging markets did well, rising by 17%, in the rest of the world markets, sales declined by 2.2%. The increase in API, or active pharmaceutical ingredients, sales continued in the June quarter, too, rising 73%. A large part of this increase is being attributed to the consolidation in its opiates business in Australia.
Sun Pharma’s operating profit margin rose by 9 percentage points over a year ago, but sequential comparison is not being presented due to a change in accounting standards. Its profit before tax rose 68% over a year ago but will not come as a surprise to the Street. “It is also known that generic Gleevec sales will taper from the September quarter.”
Till its Halol facility gets a green signal, Sun Pharma’s approval pipeline will continue to look dull. Sure, its research programme is making strides, which has the potential to earn it benefits in the longer run. But nothing can beat a resolution at Halol for the sheer lift it can give both to Sun Pharma’s performance and investor sentiment. If Taro’s and its India formulation sales growth recover, that will be of some help. Its share is down by 7% over a year ago.