Sun Pharma Falls Most in 10 Months as Profit Misses Views

Sun Pharmaceutical Industries Ltd., India’s largest drugmaker, fell the most in 10 months after reporting fourth-quarter earnings that missed analyst estimates amid higher investments and regulatory pressures.

The stock fell 6.1 percent to 762.75 rupees, the biggest decline since July 2015. Net income rose about 93 percent to 17.1 billion rupees ($255 million) from 8.9 billion rupees a year earlier. That compares with an average estimate of 19.1 billion rupees according to 19 analysts surveyed by Bloomberg.

Revenue will grow between 8 and 10 percent in the current fiscal year, Managing Director Dilip Shanghvi said on a conference call. That is lower than the 20 percent growth forecast by analysts.

Sun Pharma in February began selling its generic version of Novartis AG’s blockbuster cancer drug Gleevec in the U.S. Even so, the Mumbai-based company is among the Indian pharma firms that have been hit by increased scrutiny from the U.S. Food and Drug Administration, which regulates access to the profitable American market. An inspection of Sun’s Halol facility in Gujarat prompted a warning letter from the U.S. regulator last year.

R&D investments rose to 8.3 percent of sales in the fiscal year compared with 7.2 percent in the year earlier period. Sun Pharma last year bought Ranbaxy Laboratories Ltd., which has four plants in India that are banned from selling to the U.S.

Shanghvi, India’s second richest man, said on a conference call with analysts that the company is in the process of addressing the issues raised by the FDA at its Halol facility in the current quarter and is on track to request the regulator for re-inspection by the end of June. Sun Pharma last week said its U.S. unit received a grand jury subpoena from the Justice Department’s antitrust division related to generic products and pricing.

"Sales in the quarter were impacted due to competitive pressures on some products and supply constraints arising from remediation effort from Halol," Shanghvi said in a call with analysts. "We will also continue investing in building the specialty pharma business in the U.S. which may impact short-term profitability."

The company said it was unclear when the probe by the U.S. Department of Justice would be resolved, and said it was not product specific.

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