July 29, 2009 / 12:28 PM / 10 years ago

UPDATE 1-India's Sun Pharma Q1 net plunges; Cipla profit climbs

* Sun profit falls to 1.64 bln rupees vs 5.01 bln a year ago

* Sun says Caraco unit’s drug seizure poses a serious hurdle

* Cipla Q1 net profit 2.42 bln rupees, up from 1.40 bln

* Sun shares end down 5.2 percent; Cipla falls 2.8 percent

(Adds Cipla results, details, background)

BANGALORE, July 29 (Reuters) - India’s Sun Pharmaceutical Industries Ltd (SUN.BO) posted a sharp plunge in quarterly net profit on Wednesday, weighed down by the recent seizure of its unit’s medicines by the U.S. health regulator on manufacturing violations.

However, rival drugmaker Cipla Ltd (CIPL.BO) posted a 73 percent jump in April-June net profit, boosted by a rise in export earnings and lower foreign exchange losses in the quarter as compared to a year-ago period.

Last month, U.S. authorities seized all medicines produced by generic drugmaker Caraco Pharmaceutical Laboratories CPD.A, a unit of Sun Pharma, at Michigan facilities following, what health officials said, repeated violations of manufacturing standards.

The drugs included generic versions of heart, pain and psychiatric medicines. [ID:nN25294672]

“The regulatory setback at Caraco, resulting in seizure of products, does pose a serious hurdle to our business on the path to replicating our past success,” Sun Pharma’s chairman and managing director, Dilip Shanghvi, said in a statement. The Sun Pharma statement said Caraco continued to work closely with the U.S. Food and Drug Administration (FDA) to address the issue, but a company spokesman declined to give details.

Global demand for generic drugs from Sun Pharma and rivals such as Dr Reddy’s Laboratories (REDY.BO) and Ranbaxy Laboratories RANB.BO is booming as nations around the world battle rising healthcare costs.

But export-driven Indian companies are facing stiff pricing pressure as more drug makers jump into the generics market. Increased scrutiny of manufacturing standards by overseas regulators is also a worry as it could delay new launches.

In February, the FDA said that Ranbaxy had sold misbranded or adulterated drugs in the United States, the company’s largest market, having earlier banned imports of more than 30 of the company’s generic drugs.

SUN NET DOWN, CIPLA SURGES

Sun Pharma, India’s largest drugmaker by market value, said net profit in April-June, its fiscal first quarter, fell more than forecast to 1.64 billion rupees ($34 million), compared with 5.01 billion rupees in the same period a year ago. Net sales dropped 24 percent to 7.88 billion rupees, dragged by a 56 percent decline in sales of its U.S. unit, Caraco, following the regulatory action.

A Reuters poll of 10 analysts had forecast net profit to fall to 3.77 billion rupees on revenue of 10.02 billion rupees.

Mumbai-based Sun Pharma sells copycat versions of drugs such as Paraplatin — which is indicated for the treatment of ovarian cancer — and Xanodyne Pharmaceuticals’ painkiller Roxicodone tablets. Cipla’s June quarter net profit rose to 2.42 billion rupees, from 1.40 billion reported a year earlier. A Reuters poll of 10 analysts had expected a net profit of 2.51 billion rupees.

Cipla said its board had approved the proposal to raise up to 15 billion rupees by issue of securities in the domestic or international market.

Shares in Sun Pharma, which the market values at $5.4 billion, fell 5.2 percent to 1,188.25 rupees and Cipla closed down 2.8 percent at 274.95 rupees in the main Mumbai market .BSESN that dropped 1 percent. ($1=48.4 Indian Rupees) (Reporting by Sumeet Chatterjee; Editing by Himani Sarkar)

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