Q3 Dip for Sun Pharma; Firm Claims U.S. Disruption as Cause

Published Date : Feb 18, 2015

Sun Pharmaceutical’s stock fell 2.7 per cent on Monday, after relaying disappointing results over the previous weekend regarding the third quarter of FY2015.

American sales fell nearly 5 per cent, despite a positive output by its subsidiary in the U.S., Taro. Since the U.S. accounts for nearly 60 per cent of the company’s total sales, the fall in overall profit was a direct consequence of that.

The fall in stocks has been attributed by the company to the temporary supply restrictions that have developed out of the remediation efforts. The efforts were following an adverse notice from the FDA after its officials had inspected the company’s facility in Halol, Gujarat.

Sun Pharma has not availed of any drug approvals that were produced in this facility over the past few months.

An earlier posting by Taro had revealed an 11 per cent increase in sales over the previous year at US$238 million for the December quarter. Despite that, the consolidated sales of Sun in the U.S. stood at US$413 million which was down 5 per cent.

On the positive side, domestic sales were encouraging and had expanded 21.4 per cent over the year, in comparison to the industry average growth of 12 per cent. At the same time, Sun was able to maintain the Ebitda margin of nearly 44.9 per cent. They maintained it despite slower sale rates and a high expense on R&D which chalked up 8.5 per cent of the sales.

The R&D expenditure was up 25 per cent in sequence, an increase which was caused by the in-licensed inflammatory disorder drug, Tildrakizumab from Merck.

The Ebitda was also affected by costs of integration and compliance with Ranbaxy, in the middle of an acquisition. Analysts said that the Q3 results from Sun Pharma were lower than estimated due to this disruption in supply from Halol.