Sun Pharma Warns ‘New Normal’ Will Push Down Its Sales Next Year
(Bloomberg) -- Sun Pharmaceutical Industries Ltd., India’s largest drugmaker, warned investors that sales could decline in the coming year amid downward pressure on generic-drug prices in the U.S. and regulatory issues at one of its biggest factories.
Revenue fell 6.6 percent to 71.4 billion rupees ($1.11 billion) in the three months ended March 31 from the same period a year earlier.
The slide could continue and result in a “single digit” percentage decline in annual sales next year, Dilip Shanghvi, the company’s founder and managing director, said on a conference call with analysts. For the just-ended fiscal year, Sun’s sales rose to 316 billion rupees from the year before.
“There is a new normal that is getting established,” Shanghvi said on the call. “The U.S. generic industry is facing rapidly changing market dynamics. Increased competitive intensity and customer consolidation is leading to pressure on pricing. Continued delay in approvals from Halol facility is also impacting us.”
Intense competition and falling prices in the U.S. have been blamed for disappointing results among India’s drugmakers this quarter. Lupin Ltd., the country’s second-biggest pharmaceutical firm, said earlier this week that its U.S. revenue could fall in the coming year; its U.S. sales slid 12 percent in its most recent quarter.
Sun Pharma is also hampered by problems at one of its key Indian plants. Its factory at Halol in the Western Indian state of Gujarat has been under a warning letter from the U.S. Food and Drug Administration since 2015 over manufacturing deficiencies. The issues at the plant have kept Sun Pharma from bringing new products to market.
Sun Pharma’s dearth of new products makes it harder to offset increased competition in the U.S., where prices for generic drugs have eroded as the FDA approves a record number of new copycat medicines and manufacturers flood into the market. Sun Pharma is investing in the development of novel therapies. A treatment for the skin condition psoriasis and another for dry eyes should be ready for introduction in the 2019 fiscal year, Shanghvi said on the conference call.
Sun Pharma is presuming there will be no new approvals out of Halol in the 2018 fiscal year, and it is looking at transferring some products to other facilities, Shanghvi said.
“They haven’t launched too many new products,” Nitin Agarwal, an analyst with IDFC Securities Ltd., said by phone before Sun Pharma released its results. “A lot of their approvals are linked to resolution of the plant issues.”
Sun Pharma reported U.S. sales declined 34 percent to $381 million in the most recent quarter from the same period last year, which benefited from exclusive rights to sell a generic version of Novartis AG’s blockbuster cancer drug Gleevec that have since expired. Earlier this week, Sun Pharma’s Israeli unit, Taro Pharmaceutical Industries Ltd., reported steep declines in both revenue and profit due to increased competition in the U.S.
Quarterly profit fell to 12.2 billion rupees from the year before, missing the average forecast of 15.1 billion rupees in a Bloomberg survey of analyst estimates.
A reinspection of Sun Pharma’s Halol plant last November and December, after nearly a year of remediation efforts, resulted in a new list of concerns that must be addressed before the FDA will lift the warning letter. Clearance of the warning letter may require another inspection, Sun Pharma’s Shanghvi said on the call.