Sun Pharma earnings decline less-than-expected, Cipla earnings jump 82 per cent on forex gains

Drug manufacturers Sun Pharma & Cipla beat market expectations on earnings, but there may be more to those numbers with Sun Pharma continuing to be in woods on the US FDA inspections and Cipla domestic sales growth being cause for concern. 

Sun Pharma's showing in the September came as a pleasant surprise to the market as earnings declined less than expected and the company's consolidated revenues expected to take a fall around 20 per cent held steady at Rs1,185.17 crore. Consolidated net profit fell 11 per cent to Rs453.81 crore as against Rs512.77 crore a year earlier.                    
The lower-than-expected fall comes on one-time gains on product sales in the US and from settlement of litigation. The company's domestic formulations business registered a modest 5 per cent growth that was much lower than the average industry growth of around 12 per cent.

Sun Pharma's international generic sales apart from that of its US subsidiary Caraco surged nearly 30 per cent. According to analysts following the action from the US FDA, situation at Caraco seems to be improving from the profit the company reported this quarter against loss in the June quarter and a 63 per cent q-o-q rise in its sales.

While the company's performance has been better than in the preceding June quarter, the growth momentum reported in the past fiscal seems to be lacking, analysts say. They add that an early resolution of compliance with the US FDA and a strong product pipeline would probably help the company lost ground quickly.

Some analysts are however quick to point out that unlike other generic companies, Sun Pharma is trying to build its entire business focusing on only the US and India. They say revenues on emerging markets remain at just about 10 per cent of the total and add that the growth of drug prescription sales in the US do not bode well for US-centric generic companies.

But Dilip Shanghvi, CMD of Sun Pharma says the US is the world's largest market and Sun would remain focused on that market in future as well. Starting with the loss making Caraco Pharmaceuticals which it acquired in 1997, Sun Pharma completed five acquisitions in the US for an initial investment of only about $7.5 million.