Sun Pharmaceutical Industries Ltd’s pharmaceutical business chugged along in the September quarter. Its regional break-up showed a mixed performance, with India sales in good shape, US sales slowing, and a mix of price hikes and the right product mix working for it. The company’s profitability improved, partially compensating for relatively slower sales growth.

Sun Pharma’s sales rose by 13.4% to 4,770 crore, a bit higher than the 13% growth seen in the June quarter. In rupee terms, its US sales rose by 12.5%, but in dollar terms, growth was healthier at 15%. A high base effect in the year-ago period held down growth rates. Sequentially, growth was much healthier at 25%, chiefly due to a sharp jump in its US-subsidiary Taro Pharmaceutical Industries Ltd’s sales growth. Sun Pharma’s US market sales comprise drugs sold by it and Taro.

But India continues to see improved sales growth, as the market comes off the slow growth due to bottlenecks that sprung up during implementation of the new drug pricing policy. Sun Pharma’s sales in India rose by 21%, better than the preceding quarter’s 17% growth. While sales in remaining markets were relatively low, they have stepped up from earlier levels, and the company expects receding supply bottlenecks to see growth improve further.

If growth was subdued, Sun Pharma made up for it by improving profitability, with the main contribution being a reduction in its material cost to sales. That indicates a mixture of price increases and product mix at play. Its operating profit margin rose by 1.7 percentage points over a year ago and by 1.9 percentage points sequentially. While operating profit rose by 18.3%, net profit after minority interests rose by 15.4%.

Barring events such as a major generic product approval in the US market or an acquisition or two, a largely uneventful period lies ahead for Sun Pharma’s operations. But there are two pending matters shareholders will be keeping a keen eye on. Ranbaxy Laboratories Ltd’s merger with the company is due soon, which should yield a post-merger financial picture. Shareholders will also be waiting for news of a successful resolution of the observations that were raised by the US food and drug administration after it had inspected Sun Pharma’s plant at Halol in Gujarat. A delay in either event will induce some uncertainty in an otherwise steady outlook.

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