One-time litigation loss, slow domestic business drag Sun Pharma Q2

Company misses revenue estimates too, delivering a top line of Rs 69.37 bn, up a moderate 4.3%. Analysts had expected double-digit revenue growth for the quarter

Hit by a one-time loss of Rs 12.14 billion on Modafinil antitrust litigation, and slow domestic business, pharmaceutical company Sun Pharma on Tuesday posted a consolidated loss of Rs 2.18 billion for the quarter-ended September. Excluding the exceptional expenses, the net profit stood at Rs 9.96 billion.

It had posted a profit of Rs 9.12 billion for the year-ago period, it said in a BSE filing.

Earlier, in the April-June quarter of FY18, it had posted a surprise net loss of Rs 3.2 billion due to a Rs 9.5-billion settlement related to its Modafinil drug used to treat excessive sleep disorders. This is, thus, the second provisioning for the drug. 

The firm also missed estimates on the revenue front, posting a revenue of Rs 69.37 billion for the quarter — a moderate growth of 4.3 per cent from the year-ago period. Analysts had expected a double-digit revenue growth for the quarter.

Sun Pharma Managing Director Dilip Shanghvi said, “Our soft Q2 performance is not a reflection of the underlying health of the overall business. We continue to focus on strengthening our core operations and enhancing our overall efficiencies. We are fairly positive on our performance for the rest of the year.”

“We are excited with the successful launch of Ilumya in the US,” he added. The psoriasis treatment drug was launched in the US market in October.

The company, however, delivered operationally for the quarter. It posted an operating profit of Rs 14.4 billion, resulting in an Earnings before interest, tax, depreciation and amortisation (Ebitda) margin of 21 per cent.

Sun Pharma’s India business was down 16 per cent over a year ago on back of a planned one-time inventory reduction in the supply chain, coupled with a higher base of the year-ago period. The domestic business accounted for 27 per cent of the total sales. 

Sales in other emerging markets were flat at $195 million for the quarter. However, sales in the US were $342 million — a growth of 11 per cent over the year-ago period. It accounted for 35 per cent of the total sales. Its US subsidiary, Taro’s Pharmaceutical’s, net profit for the quarter was $63 million, up 19 per cent over the year-ago period.

The consolidated research and development (R&D) expense for the quarter stood at Rs 4.52 billion compared with Rs 5.11 billion for the yaer-ago period.

“For the quarter, four abbreviated new drug applications (ANDAs) were filed and four approvals were received. Additionally, the pipeline includes 48 approved NDAs, while six NDAs await USFDA approval,” the company said. It would ramp-up its R&D spend in the second half of the financial year, it added.