Sun warns of U.S. pricing pressure hitting 2019 profit

The pharmaceutical company plans to reduce “unviable” generics research

Bitter pill: Drugmakers are facing rising competition and pricing scrutiny in the U.S.

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

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.

Quality failures

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 Mr. Shanghvi who, along with affiliated parties, owns a major stake in the company he founded in 1983.

Plant recertification

“We re trying to get the (Halol) plant recertified 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.

Significant expenses

“We want to find a new engine of growth and that is why we are investing in this,” Mr. 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 — about 13% higher than the ₹264.89 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% of the total, fell 3%, Sun said.

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