U.S. Cancer Drug Sales Helps Billionaire’s Sun Triple Profit

  • Rights to generic Gleevec in U.S. offset competititive market
  • Shares trade lower on questions about post-Gleevec business

Sun Pharmaceutical Industries Ltd. reported quarterly profit that more than tripled from a year earlier as its exclusive right to sell the generic version of Novartis AG’s blockbuster cancer drug Gleevec in the U.S. helped offset price pressures in that market.

Net income rose to 20.3 billion rupees ($303.5 million) in the three months ending June 30 from 5.56 billion rupees in the same period last year, India’s largest drug maker said in a statement Friday. Sun’s billionaire owner Dilip Shanghvi, who is also India’s second-richest man, has been pushing the company into more specialty medicines, including cancer therapies, which have higher barriers to entry because they are trickier to master and so also claim higher margins.

Earlier this month India’s second and third largest drugmakers, Dr. Reddy’s Laboratories Ltd. and Lupin Ltd., reported weak U.S. sales. Margins have been squeezed between fierce competition and the increased pricing power of the Indian generic drugmakers’ largest customers, including CVS Health Corp. and Walgreens Boots Alliance Inc. who control most generic drug purchases after a wave of consolidation and alliances.

“Dr. Reddy’s and Lupin are facing competition for their products in the generic market in the U.S.,” said Ranjit Kapadia, a Mumbai-based analyst covering the Indian pharmaceutical industry at Centrum Broking. “Sun has got special products in dermatology and injections, plus some other products in central nervous system category, so that is facing lower competition. Last conference call they said they were facing margin pressure, but Gleevec has given them good upside during this quarter."

Gleevec Factor

Sun’s Israeli unit Taro Pharmaceutical Industries Ltd. reported margins on their U.S. business that were some of the industry strongest in the industry this week, Kapadia said. Sun shares whipsawed after the release, moving as much as 2.2 percent in both directions before trading 1 percent lower at 800.55 rupees in Mumbai.

“It should only be the Gleevec factor, nothing else,” Surya Patra, an analyst at PhillipCapital India Pvt. in Mumbai, said by phone. “Post Gleevec exclusivity the numbers will sequentially see a downturn.”

Sun in February began selling its generic version of Gleevec in the U.S. It was the first company to file its application to make a generic version of the pill, making it eligible for six months of marketing exclusivity in the U.S.

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