Sun Pharmaceutical Industries Ltd.’s profit rose for the first time in more than a year, on account of a one-time tax gain and lower raw material costs
Net profit rose 7 percent year-on-year to Rs 1,310 crore during January-March period, Sun Pharma said in its filing with the stock exchanges. That’s higher than the Rs 895 crore that analysts tracked by Bloomberg had projected. The bottom line was aided by a one-time tax write-back of Rs 259 crore during the quarter. A 39 percent decline in raw material costs also boosted the bottom line.
This is the first profit growth in six quarters for Sun Pharma which has been grappling with falling generic drug prices in the U.S. Managing Director Dilip Shangvi expects the situation to improve as price erosion in the world’s biggest market for medicines eased. “Over the last four quarters, we have been able to record a gradual improvement in performance despite a challenging U.S. generic pricing environment,” he said in a separate press release.
Faced with high competition in its core generics business, Sun Pharma is looking to add specialty drugs to its portfolio in the U.S. The company will likely launch three novel products in that market - Ilumya for skin condition psoriasis, OTX-101 for dry eyes and Yonsa for prostrate cancer – which will entail upfront investments, Shangvi said.
Regulatory concerns also weighed on the company as its Halol plant has been under a U.S. Food and Drug Administrator warning letter since 2015. However, a reinspection earlier this year saw the number of potential manufacturing violations drop to three from nine the last time it was inspected. The plant still has not been cleared.
- India sales went up 2 percent year-on-year to Rs 1,963 crore.
- U.S. sales fell 3 percent to $368 million.
- Emerging market sales went up 10 percent to $199 million.
- Rest of the world sales increased 6 percent to $116 million.
- Net sales fell 2.2 percent year-on-year to Rs 6,980 crore.
- Operating income rose 8.8 percent on a yearly basis to Rs 1,683.5 crore.
- Operating margin contracted to 24.1 percent from 24.8 percent.
- Sun Pharma increased its research and development spending to RS 743 crore during the quarter. That's about 11 percent of its total sales. This is higher than the 9 percent it had invested in the same quarter last year.
- The company recommended a dividend of Rs 2 per share for the year ended March 2018.
Shares of Sun Pharma rose 0.78 percent to Rs 466 per share ahead of the earnings announcement. The stock declined 13.3 percent in the quarter ended March. That compares with a 3.9 percent decline in the country’s benchmark Nifty.