Sun Pharma Drops Most on Record on Full-Year Profit Warning

Updated on

Sun Pharmaceutical Industries Ltd. plunged the most on record after saying annual revenue will remain flat or decline as it integrates a rival it purchased last year.

Asia’s biggest generic drugmaker tumbled 15 percent to 805.25 rupees in Mumbai on Tuesday after sliding as much as 16.1 percent earlier, making it the biggest decliner on the benchmark S&P BSE Sensex Index.

Profit may be “adversely impacted” in the year to March 31, weighed by costs and charges linked to the merger with Ranbaxy Laboratories Ltd., the company said in an exchange filing Monday after trading hours. Remedial actions to bring Ranbaxy’s facilities into compliance may also hurt profit, it said.

Sun Pharma, controlled by Indian billionaire Dilip Shanghvi, last reported a drop in annual profit in 2010. The company faces the challenge of resolving the U.S. Food and Drug Administration’s import bans on four of Ranbaxy’s Indian plants while maintaining its profitability. The Mumbai-based company’s earnings missed analyst estimates in the March quarter because of the acquisition.

As of yesterday, the median estimate of 38 analysts surveyed by Bloomberg News had been for sales growth of 15 percent to 313 billion rupees ($4.91 billion) in the year ending March 2016.

Sun’s sales forecast is “significantly below expectation,” wrote Piyush Nahar, an analyst at Jefferies India Pvt., in a note to clients. “The miss, in our view, is largely due to one-off issues,” including supply disruptions at its Halol facility due to problems with good manufacturing practices compliance, and integration costs.

Sun is working to expedite removal of import restrictions on at least one of the banned Ranbaxy facilities, Shanghvi said. “There are many products that have been filed out of that facility, and those approvals can also come as a result of the resolution,” he said.

Daiichi Sankyo

The world’s fifth-biggest generic drugmaker also said it may discontinue certain “non-strategic businesses” as part of the integration. It faces supply constraints for some products due to deviations from good manufacturing practices at its Halol facility, the company said in the exchange filing.

The combination will help Sun save as much as 20 percent more than its previous estimate, the company said in the statement. The company had earlier forecast savings of $250 million by the year ending March 31, 2018, according to the statement.

Ranbaxy’s then-parent Daiichi Sankyo Co. in April 2014 agreed to sell its controlling stake in the company to Sun. The deal came after the Tokyo-based company had taken writedowns on the Indian drugmaker and seen its own share price slide. Shanghvi had a net worth of $19.9 billion as of yesterday, according to the Bloomberg Billionaires Index.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE