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Sun Pharma posts Q1 loss at Rs 425 cr on Modafinil settlement; US, India drag revenue 25%

Sun Pharmaceutical Industries’ first quarter earnings disappointed analysts on Friday as it posted consolidated loss of Rs 425 crore due to settlement for Modafinil drug. Weak US & India businesses performance and higher base in year-ago quarter also impacted profitability.

The company had reported a profit of Rs 2,033.71 crore in same quarter last year that included the benefit of the 180-day exclusivity for Imatinib which expired in July 2016.

“Net profit for the quarter was adversely impacted by settlements with certain plaintiffs related to the Modafinil antitrust litigation in the US, with the settlement amounting to Rs 950.5 crore,” the company said in its filing.

Excluding the Modafinil settlement, adjusted net profit for Q1FY18 was at Rs 526 crore, down 74 percent over Q1 last year, it added.

Revenue from operations in Q1 fell 24.8 percent to Rs 6,209 crore compared with Rs 8,256 crore in corresponding quarter of last fiscal, dented by US business.

“Q1 performance was not good and not in line with past performance due to the combined impact of increasing investments in global specialty business, temporary disruption in India business due to GST implementation, a challenging US generic pricing environment and the Modafinil settlement,” Dilip Shanghvi, Managing Director said.

He expects performance to gradually improve in the second half of this year.

India’s branded formulations, which contributed 29 percent to total revenue, fell 5 percent to Rs 1,761 crore YoY. Growth was temporarily impacted by the implementation of GST in India; however the underlying growth remains robust, the company said.

US business, which accounted for 37 percent to total sales, showed a 42 percent degrowth YoY at USD 351 million due to pricing pressure and end of exclusivity for Imatinib July 2016. Subsidiary Taro Pharma also reported 50 percent fall in Q1 profit YoY.

However, emerging markets sales grew by 9 percent and formulation sales in Rest of World (ROW) markets excluding US and Emerging Markets rose by 37 percent compared with same quarter last year.

EBITDA (earnings before interest, tax, depreciation and amortisation) plunged sharply 62.5 percent to Rs 1,096 crore and margin halved to 17.6 percent from 35.4 percent on year-on-year basis.

Profit for the quarter was estimated at Rs 1,144 crore and operating income was expected at Rs 1,744.5 crore with margin at 24.6 percent, according to average of estimates of analysts polled by CNBC-TV18.

During the quarter, Sun Pharma filed 5 ANDAs and received approvals for 8 drugs.

The stock price closed down 1.92 percent at Rs 451.30 on the BSE ahead of earnings that announced after market hours.