Sun Pharma: a good quarter but no news on Halol

While Sun Pharma’s Q2 results present a picture of a company that is growing and is in good health, the end to the long-drawn Halol episode is what investors are awaiting


The company’s gross sales rose by 13.2% from a year ago to Rs7,764 crore, on the back of an 11% increase in India while the US market grew by 9% in dollar terms.  Photo: Hemant Mishra/Mint
The company’s gross sales rose by 13.2% from a year ago to Rs7,764 crore, on the back of an 11% increase in India while the US market grew by 9% in dollar terms. Photo: Hemant Mishra/Mint

Sun Pharmaceutical Industries Ltd’s results themselves brought in good news, beating Street estimates, but no progress on the Halol plant front will be a disappointment. The management said it has invited the US Food and Drug Administration (FDA) to inspect the plant, which was the status post-June quarter as well. A resolution to the issues raised by FDA pertaining to this plant is expected to clear the way for products that have been filed from this site.

The company’s gross sales rose by 13.2% from a year ago to Rs7,764 crore, on the back of an 11% increase in India while the US market grew by 9% in dollar terms. The surprise element this quarter was from its other operating income, which came in at Rs501 crore against Rs15 crore a year ago, and Rs236 crore sequentially. That resulted in its revenue rising by 20.2% and since most of other operating income flows directly to profitability, its Ebitda (earnings before interest, taxes, depreciation, and amortization) rose by 69%.

The company said it received $45 million (about Rs300 crore) as a milestone payment for a drug under development. Although its US market sales declined by 9%, this can be attributed to the end of exclusivity period sales of generic Gleevec, which boosted sales in the June quarter. The September quarter saw only one month of sales in the exclusivity period. Given the size of that drug’s sales, add to that the fact that its subsidiary Taro Pharmaceutical Industries Ltd’s sales declined sequentially, Sun Pharma’s base business appears to have done relatively better than expected.

Recently, the company said it has launched authorized generic versions of four variants of olmesartan, used to treat high blood pressure, in the US market in an agreement with Daiichi Sankyo Inc. Daiichi’s products collectively had sales of $2.5 billion in the 12-months ended August 2016 and one can expect Sun Pharma to get a share of these revenues, which should boost US market sales in this quarter.

That should give shareholders something to look forward to but the magic words they are really waiting to hear is an EIR for the Halol plant. EIR stands for establishment inspection report and okays the plant as being compliant again.

While Sun Pharma’s quarterly results present a picture of a company that is growing and is in good health, the end to the long-drawn Halol episode is what investors are awaiting. Recent news on a probe on suspected drug price collusion in the US by the Department of Justice has done nothing to soothe their nerves. The Sun Pharma share is down by 18% over its level three months ago.

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