Analyst Concall
Sun Pharma cuts FY25 R&D guidance to 7% of sales
This story was originally published at 21:21 IST on 31 January 2025
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--Sun Pharma: Primary focus on growing specialty products business
--Sun Pharma: To decide on hiring more medical representatives after March
--Sun Pharma: Have 14,000 people as part of field force in India
--Sun Pharma: Expect R&D expense to be less than 7% of sales in FY25
--Sun Pharma: US specialty business continues to do well
--Sun Pharma: Net cash stands at $3 billion as of Dec. 31
By Sunil Raghu & Akshita Kumar
AHMEDABAD/MUMBAI – The management of Sun Pharmaceutical Industries Ltd. has further lowered its guidance for research and development investment to 7% of sales in the current financial year. After the Jul-Sept earnings, the management had guided for R&D spending to be 7-8% of sales, which was also lower than its earlier tentative range of 8-10%.
The R&D spending has been lower-than-guided as some clinical trials for specialty drugs have been delayed, the senior management told analysts at a post-earnings conference call to discuss the Oct-Dec earnings. Sun Pharmaceutical spent INR 8.45 billion, or 6.3% of sales, on R&D during the December quarter. Analysts had expected R&D investment at around 7.5%-8% of sales. In the year-ago period, the company had spent INR 8.25 billion on research and development.
Any delay in clinical trials on the part of the innovator from which the company may be licensing drugs would lead to lower R&D spending than guided for in the current financial year. The company did not share details of any such delays in clinical trials.
Sun Pharmaceutical said its primary focus will continue to be to augment specialty drug assets and expand capabilities, as the underlying traction and demand for the business remain strong. For Oct-Dec, Sun Pharmaceutical's global specialty sales were up 24.8% at $370 million. The drugmaker is also confident of keeping up the momentum in US specialty sales, which it said continue to do well. The management said Sun Pharmaceutical was able to expand prescription volumes of key drugs such as Ilumya in the US.
Sales from the company's US formulations business declined 0.7% on year to $474 million in Oct-Dec. For the first nine months, sales were up 5.7% at $1.46 billion.
The outlook for the other key market, India, remains robust as the company continues to grow faster than the industry. For Oct-Dec, total consolidated sales from the India market rose nearly 13.8% on year to INR 43 billion. For Apr-Dec, sales were up 13.7% at INR 127 billion. The growth was led by higher volumes and new launches, the management said. The company launched 12 new products during the December quarter in India.
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 8.2%, up from 7.8% earlier. Talking of its field force, the management said Sun Pharmaceutical has 14,000 medical representatives on the ground. The company is considering increasing this number after Mar. 31, it said.
The management said pricing pressures in Japan, a key segment of the company's rest-of-the-world division, may limit its growth. The management said prices fall 5-7% every year in the Japanese market and so its focus is on growing the specialty business over the generic business. The drugmaker's emerging markets sales rose 10.1% on year to $277 million, while rest-of-the-world formulation sales jumped 21% to $259 million for Oct-Dec.
The revenue from active pharmaceutical ingredients rose almost 22% from a year ago to INR 5.68 billion, it said. The drugmaker's consolidated net profit for Oct-Dec rose 15% to INR 29.03 billion, from INR 25.24 billion a year ago. This was almost in line with the Street's expectation of INR 28.98 billion.
Sun Pharmaceutical's consolidated net sales rose 10.45% on year to INR 136.75 billion during the reporting quarter, slightly higher than the average estimate of INR 134.40 billion. Sequentially, consolidated net sales was up 2.89%. Since the first quarter of the financial year 2020-21 (Apr-Mar), the sales growth recorded by Sun Pharmaceutical has always been in double digits, except for the December quarter of FY24 and the June quarter of FY25, when on-year growth was in a single digit.
As of Dec. 31, the company had $3 billion in cash on its books, the management said. The company's shares saw gains extended further after the earnings. The shares opened at INR 1,742 and touched the day's high of INR 1,769.85 before closing 0.3% higher at INR 1,743.95 on the National Stock Exchange. End
US$1 = INR 86.61
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Rajeev Pai
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