The country’s largest drug firm Sun Pharma posted a 22 per cent year-on-year (YoY) dip in profit before tax (PBT) for the third quarter of the financial year to Rs 1,351.3 crore while its sales came in at Rs 8,039 crores, growth of 5 per cent over same quarter last year. While the company’s domestic sales posted 13 per cent growth, the US market remained tough, witnessing a fall of 3 per cent YoY.
The net profit for the quarter was Rs 914 crore down 26 per cent YoY due to other expenses, reduction in forex gains and higher taxes, the company clarified. The earnings before interest, tax, depreciation and amortisation came in at Rs 1,725 crores, with resulting Ebitda margin of 21.5 per cent.
Expenses were up mainly due to increase in R&D spend, consolidation of Pola Pharma as well as increased marketing costs for the speciality business in the US. There is an increase in staff costs (around 3.6 per cent YoY) due to inflation and addition of the Pola Pharma business in Japan.
ICICI Direct analysts noted that while Sun Pharma's Q3FY20 revenues were in-line with estimates, however operational performance was better than expected while profitability was lower due to higher tax and depreciation.
Dilip Shanghvi, managing director of Sun Pharma told investors in a post results call, “While we are doing well in most of the geographies, the US generic market continues to be competitive and challenging. We are focussed on controlling our costs and improving our efficiencies in all parts of our business while increasing our investments in our speciality business.”
During the quarter Sun focussed on enhancing its speciality business in new markets by entering into a licensing agreement with AstraZeneca in China for some of its novel oncology products. Shanghvi said that Sun is witnessing a gradual traction in its global specaility revenues.
In the third quarter the global speciality revenue was about $118 million across markets. Speciality R&D accounted for 24 per cent of total R&D spend during the quarter.
Sun has filed its responses to the US Food and Drug Administration (USFDA) on the Halol plant detailing the steps it plans to take for the eight observations issued by the USFDA in December inspection. “We are committed to addressing these observations promptly,” Shanghvi said.
Taro sales came in at $ 148 mn for the third quarter, down 16 per cent over Q3 last year. Taro's net profit for Q3FY20 was $68 mn.
Sun's India business accounted for roughly 31 per cent of its total sales and continued to do well. The company has initiated an expansion of its field force by 10 per cent in line with its growth strategy. The additional field force would be on-boarded by Q1FY21.
On the US front, however, it is facing some challenges. The US sales account for about 31 per cent of its totals sales and stood at $350 mn for the third quarter. The generics business continues to be competitive and Sun has been launching new products every quarter.
Speciality business sales grew over September quarter driven mainly by higher seasonal sales of some products and contributions from dry eye disease product Cequa launch. It commercialised Cequa in the third quarter.