What Taro Pharma’s June Quarter Earnings Mean For Sun Pharma Q1 Results
India’s largest drugmaker is slated to announce its June quarter results on Friday.
Sun Pharmaceutical Industries Ltd.’s U.S. subsidiary witnessed a decline in sales and profit in the quarter ended June, prompting analysts to say that it may weigh on India’s largest drugmaker’s financials.
Net sales of Taro Pharmaceutical Industries Ltd. declined 27% year-on-year to $117.6 million, according to the results disclosed on its website. It reported an operating loss of $449 million compared with a profit of $686 million a year ago.
That came as the company adjusted for settlements and contingencies worth $478.9 million to resolve all matters related to a long-running investigation by the U.S. Department of Justice that charged Taro Pharma of conspiring to fix prices of certain generic drugs.
Uday Baldota, chief executive officer at Taro Pharma, said the results reflect the challenging times it’s facing, not only due to the continuing uncertainty of the duration and impact of the Covid-19 pandemic, but also in the overall U.S. generic industry, which will continue in the foreseeable future. “We are happy to have reached a resolution with the DOJ (U.S. Department of Justice), so that we can move forward and sharpen our focus on growing our business.”
The U.S. business accounted for 34% of Sun Pharma’s overall consolidated sales in the quarter ended March, according to the latest data available on the exchanges. Taro Pharma contributed 47% to the parent’s total U.S. formulation sales.
And that's why a muted performance by the subsidiary may have triggered caution among analysts.
In the U.S., there was a sharp drop in patients visiting physicians, especially in the ophthalmology and dermatology categories, which should have an adverse impact on Sun Pharma, according to Nirmal Bang Securities. Sun Pharma has a significant value in the U.S. business coming from dermatology sales namely through Dusa, Taro and Ilumya, it said in a note.
Brokerages Prabhudas Lilladher and Emkay Global agreed.
According to Emkay Global, a hit on the specialty portfolio and Taro Pharmas’s sales (dermatology concentration) may lead to a decline in the U.S. business. Prabhudas Lilladher expects the subsidiary to continue underperforming, given pricing pressure in the U.S. derma products.
Also Read: Sun Pharma Aims To Gain Market Share, Preserve Cash Amid Pandemic
Sun Pharma is set to announce its results for the quarter ended June on Friday.
Shares of the Indian drugmaker were trading as much as 1% higher on Thursday compared with a 0.45% drop in the benchmark Nifty 50 Index.