Indian billionaire Shanghvi offers ‘mea culpa’ post Sun’s loss

Bloomberg

The billionaire founder of Sun Pharmaceutical Industries Ltd. pledged that the drugmaker would do better after reporting its first loss in at least 12 years amid regulatory headaches and a weakening market for generic drugs.
“The reason why we are suffering is our inability to execute,” Dilip Shanghvi said on a conference call with analysts after the results were released. “The only solution is our focus on improving execution.“
India’s biggest drugmaker posted a total loss of $66.3 million in the three months ended June 30, the Mumbai-based company said. That compares with a profit estimate of about 11.8 billion rupees, on average, among 18 analysts compiled by Bloomberg. The swing into the red came largely on the back of a 9.51 billion rupees US antitrust settlement.
Generic drugmakers have seen their US businesses deteriorate as regulators there step up product approvals, ushering in new competition and prompting a steady erosion in prices. Consolidation among the biggest pharmacies has also limited manufacturers’ pricing power.
US generic-drug giant Mylan NV lowered a long-targeted profit goal this week and Israel-based Teva Pharmaceutical Industries Ltd., the world’s largest generic drug maker, said last week that it would pull back from 45 markets and cut jobs. Sun Pharma’s Israel-based unit Taro Pharmaceutical Industries Ltd. said it expects pricing pressure to continue.

Stock Slump
India’s pharma companies started reporting quarterly results two weeks ago, with many showing double-digit declines in revenue or profit.
Over that span the stock index tracking the industry has plunged more than 11 percent. Sun Pharma’s stock has fallen more than 18 percent in that time to 450 rupees a share.
Sun Pharma is particularly exposed to a squeeze on prices in the US, which accounts for about half its revenue, because its ability to offset falling prices with new products is hampered by a Food and Drug Administration sanction over manufacturing deficiencies at its factory at Halol in western India. Despite costly remediation efforts the company has been unable to shake off the sanction since 2015.
Shanghvi said that Sun has completed additional remediation demanded by the FDA after its latest inspection last year and asked the regulator to inspect the plan again.
Shanghvi reiterated guidance that Sun’s consolidated revenue would likely decline this fiscal year, though margins on its earnings before taxes and various items would likely improve to 22 percent in the second half from 17 percent in the first quarter.
Sun was tipped into a loss this quarter after it agreed in July to pay plaintiffs including Canadian rival Apotex Inc. to settle a US antitrust lawsuit over sleep-disorder drug modafinil, according to the filing. Excluding the settlement, Sun’s profit was still down 74 percent from the same period last year to 5.3 billion rupees amid slower sales in both India and the US.
As prices for simple generic drugs fall in the US Sun Pharma has been investing in the development of more complex therapies as well as completely new ones to fend off competition.