India’s largest drugmaker Sun Pharmaceutical Industries Ltd.’s profit declined in the quarter ended December due to a one-time tax payout and weak performance of its Israeli subsidiary.
Net profit fell 75.2 percent year-on-year to Rs 365.39 crore in the third quarter, the company said in a stock exchange filing today. That’s much lower than the Rs 944 crore consensus estimate of analysts tracked by Bloomberg. The bottom line was hit by a deferred tax payment of Rs 513 crore under the new tax regime in the U.S. The financials were also impacted by weak performance of Taro Pharmaceuticals Ltd. and inability to file new approvals from one of its largest plants at Halol, Gujarat owing to U.S. sanctions.
The third quarter performance reflects a “gradual improvement in profitability over the first half of this year, despite a challenging U.S. generic pricing environment,” Sun Pharma’s Managing Director Dilip Shanghvi said in a press release.
Revenue fell 16 percent to Rs 6,653.23 crore as compared to the same quarter last year, missing the Rs 6,960 crore Bloomberg consensus estimate. The decline can be attributed to the U.S. business, with all other markets growing for the quarter, Sun Pharma said. U.S. sales fell 35 percent to $328 million on a year-on-year basis during the quarter.
Operating income was also below estimates, declining more than 40 percent to Rs 1,453.30 crore while the margin contracted to 21.84 percent from 30.985 percent in the year-ago period.
The U.S. drug regulator has started reinspecting Sun Pharma’s Halol unit after it reported nine observations at the plant in July last year, BloombergQuint had reported last week. The company can’t file drug approvals from Halol after a 2015 warning letter.
Meanwhile, the company continues to focus on its speciality business, Shanghvi said. “During the quarter, we took another step forward in enhancing our specialty business by reporting acceptance of NDA filing for OTX-101 by the US FDA.” The drugmaker is investing in specialty products and by 2020, the segment will form a significant part of the business, Chairman Israel Makov had told BloombergQuint in an interview at the World Economic Forum last month.
Taro Pharma’s Financial Highlights
- Net sales declined 20 percent from the year-ago period to $155.5 million.
- Net profit down 87 percent to $18 million.
- Operating income down 52 percent to $62 million.
- Reported margins at 39.9 percent versus 58.5 percent.
Shares of Sun Pharma closed 2.5 percent lower ahead of the earnings announcement, while the benchmark S&P BSE Sensex fell 0.42 percent.