Analyst Concall
Sun Pharma sees R&D at 7-8% of sales due to pipeline delays
This story was originally published at 22:38 IST on 28 October 2024
Register to read our real-time news.Informist, Monday, Oct. 28, 2024
Please click here to read all liners published on this story
--Sun Pharma: Confident about growing specialty business in US
--Sun Pharma:R&D spend lower than guided Jul-Sept as clinical trials delayed
--Sun Pharma: Issues in Japan capped Jul-Sept growth, may hurt Oct-Dec too
--Sun Pharma: Expect R&D investments at 7-8% of sales in FY25
--Sun Pharma: Underlying trends for specialty business remain strong
--Sun Pharma: India business growth led by volume growth, new products
--CONTEXT: Sun Pharma senior management's comments at an analyst concall
--Sun Pharma: Grew higher than Indian pharma industry in Jul-Sept
MUMBAI – Sun Pharmaceutical Industries Ltd. has guided for research and development investment of 7-8% of sales during the current financial year, lower than its earlier tentative range of 8-10%. The company's R&D spend for Jul-Sept was also lower-than-guided as some clinical trials for specialty drugs have been delayed, the company's senior management told analysts at a conference call held to discuss earnings.
Sun Pharmaceutical spent INR 7.93 billion, or 6% of sales, on research and development during the September quarter. Analysts had expected R&D investments at around 6.9-7.6% of sales. In the year-ago period, the company had spent INR 7.73 billion on the same.
"We continue to invest in building an R&D pipeline for both global generics and specialty business," Chairman and Managing Director Dilip Shanghvi said. Sepcialty drug-related R&D accounted for 38% of the total research and development during Jul-Sept.
However, further delays in clinical trials at the innovator's end, from which the company may be in-licencing these drugs, could mean lower R&D spend than guided for the current financial year. The company refused to give details of these delays in clinical trials.
Sun Pharmaceutical will continue to augment specialty drug assets and expansion of its capabilities, as the underlying traction and demand for the business remain strong. The drugmaker is also confident of keeping up the momentum in U.S. specialty sales.
During Jul-Sept, sales from the company's US formulations business jumped 20% on year to $517 million. Analysts had expected the U.S. sales to rise 13% from a year ago. Sun Pharmaceutical was able to expand prescription volumes of key drugs such as Ilumya, Winlevi and Odomzo, in the U.S., even as some others such as Cequa and Pentasa have seen low volumes.
The traction in these specialty drugs helped the drugmaker's global specialty sales jump 19% on year to $286 million. Brokerages had expected 15-17% growth in Sun Pharmaceutical's specialty drug sales.
Apart from the delays in drug trials, the launch of specialty drug Leqselvi has also been deferred because of an ongoing patent litigation. This could cause a potential delay of two years, the company said.
The outlook for the other key market, India, remains robust as the company continues to grow higher than the industry. For Jul-Sept, revenues from India, rose nearly 11% on year to INR 42.6 billion, in line with expectations of 11-13% growth. The growth was led by higher volumes and new launches.
India accounts for 32% of the company's total sales. Sun Pharmaceutical said it remains the industry leader in India's INR 2.2-trillion drug market, with a share of 8.1%, up from 7.7% earlier.
Meanwhile, pricing pressures in Japan, a key segment of the Rest of The World division for the company, may limit the overall growth of the company for the next few quarters. The drugmaker's emerging markets sales rose 3.2% on year to $293 million, while Rest of World Formulation sales fell 3.5% to $199 million for Jul-Sept.
Sun Pharmaceutical reported better-than-expected earnings for the September quarter, as the company's U.S. business, led by the specialty products pipeline, grew at a higher rate than estimated, at a time when the domestic business was strong. However, the pace of profit and revenue growth was the slowest in the last three quarters.
The drugmaker's consolidated net profit for Jul-Sept surged 28% on year to 30.4 billion, higher than the Street's expectation of INR 29.5 billion. The net profit growth was 43% in Apr-Jun and 34% in Jan-Mar.
Sun Pharmaceutical's consolidated net sales rose 9% on year to INR 132.9 billion during the reporting quarter, a tad higher than the consensus average estimate of INR 132.7 billion. This is the second quarter of sub-10% sales growth for Sun Pharma, after a 12-quarter-long double-digit sales growth streak was broken in Apr-Jun.
The company's shares extended gains a tad after the earnings. They ended 2.3% higher at INR 1,902.90 on the National Stock Exchange. End
US$1 = INR 84.08
Reported by Apoorva Choubey and Steffy Paul
Edited by Manisha Baxla
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2024. All rights reserved.
To read more please subscribe
Share this Story:
