(Bloomberg) -- Sun Pharmaceutical Industries Ltd.’s profit more than halved as it lost exclusivity on a key U.S. product, increasing pressure on the company to resolve issues at a plant that has hampered new product introductions in the world’s biggest drug market.
Net income plunged 59 percent to 9.12 billion rupees ($139 million) in the quarter through September, the Mumbai-based company said Tuesday. Analysts had expected profit to decline to 8 billion rupees. U.S. sales, which fell 44 percent in the quarter, are not comparable with a year earlier because it has since lost exclusive rights for the generic version of a blockbuster cancer drug, according to a separate statement.
A consolidation among pharmacies and intensifying competition have sent prices for generic drugs in the U.S., the world’s largest market for medicines, into a tailspin and has left the global industry scrambling to adjust. Sun Pharma is particularly exposed because its ability to offset falling prices with new products is hampered by a Food and Drug Administration sanction over manufacturing deficiencies at its plant at Halol in western India.
“We expect our performance to gradually improve in the second half of this year,” Managing Director Dilip Shanghvi said in the statement.
Revenue at India’s biggest drugmaker declined 15 percent to 66 billion rupees, the third consecutive quarterly decrease.
Despite costly remediation efforts the company has been unable to shake off the sanction since 2015. Sun Pharma’s U.S. business, which in the most recent full-year period accounted for almost half of its revenue, has now shrunk to 30 percent of total, the company said.
“There is a significant amount of erosion happening in the U.S.,” Amey Chalke, an analyst at HDFC Securities Ltd., said in a phone interview before the results were released. “If Halol comes back then the U.S. would get stabilized for the next two years with the approvals coming in.”
Shares of Sun Pharma dropped 2.3 percent in early trading in India on Wednesday. The stock has declined 18 percent this year, compared with the 23 percent gain in the benchmark S&P BSE Sensex.
The generic drug industry worldwide has been roiled by changes in the U.S. market. Sun Pharma’s larger U.S.-based competitor Mylan NV, which posted quarterly earnings that missed analysts’ expectations last week, said prices of generic drugs in North America were falling at an even faster rate than in previous quarters. Israeli drugmaker Teva Pharmaceutical Industries Ltd., the world’s largest generic drug company, reported similar results earlier this month.
Approval for the company’s novel treatment for the skin condition psoriasis has been delayed, Shanghvi said on a call with analysts and investors on Tuesday. It’s now expected either at the end of 2018 or in 2019, he said. This won’t have an impact on the medicine getting permission from the U.S. regulator and Sun Pharma still sees its introduction next year in that market, Shanghvi said.
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