Sun Pharma warns U.S. pricing pressure to hit 2019 profit

(Reuters) - India’s largest drugmaker Sun Pharmaceutical Industries Ltd said on Friday it expects its 2019 revenue to come in short of analysts’ expectations due to pricing pressure in its main market, the United States.

A man walks past the logo of Sun Pharmaceutical Industries Ltd. outside its research and development centre in Mumbai, May 25, 2018. REUTERS/Francis Mascarenhas/Files

Makers of generic drugs have seen poor sales as uncertainty grows in the global market for copycat drugs due to rising competition and pricing scrutiny in the world’s largest healthcare market.

The warning compounds problems at Sun, which has been struggling to get clearance for its factories that are under U.S. supply bans due to quality control failures.

It now plans to reduce its research spend on some generic drug projects that have become “unviable”, Dilip Shanghvi, the company’s founder and managing director, said on a conference call with analysts.

The move follows larger rival Teva Pharmaceutical Industries’s statement earlier this month that it planned to reduce its U.S. generics business.

“As a large investor, I am also unhappy,” said Shanghvi who, along with affiliated parties, owns a major stake in the company he founded in 1983.

“We re trying to get the (Halol) plant re-certified at the earliest. It’s taking much longer,” he said.

The world’s fifth-largest generic medicines maker is pinning its hopes on the launch this year of three specialty drugs: Yonsa for a type of prostate cancer, another, named OTX101, to treat dry eye, and Ilumya for psoriasis.

“We want to find a new engine of growth and that is why we are investing in this,” Shanghvi said, adding: “We will have to incur significant expenses for these important launches.”

Thirty-six analysts polled by Reuters expect Sun’s fiscal 2019 revenue to come in at 300.36 billion Indian rupees ($4.43 billion) - about 13 percent higher than the 264.89 billion rupees for 2018.

While fourth-quarter profit was better than expected, helped by an uptick in India and emerging markets, revenue in the United States, which accounts for almost 35 percent of the total, fell 3 percent, Sun said.

Rivals Dr. Reddy’s Laboratories Ltd and Lupin Ltd reported weak March-quarter earnings this week, blaming pricing pressures.

($1 = 67.7800 Indian rupees)

Reporting by Zeba Siddiqui in Mumbai and Arnab Paul in Bengaluru; Editing by Subhranshu Sahu and Louise Heavens