Sun profit squeezed as impact from FDA concerns persist at Halol plant

India's Sun Pharma saw profits fall as sales in the U.S. continue to be hurt by FDA concerns at Halol, a plant that it leans on for U.S. supplies.

Sun Pharma, India’s largest drugmaker, had hoped to get out from under a regulatory yoke on its plant in Halol when the FDA returned for an inspection in December. Instead, the FDA issued another Form 483 for the drugmaker’s key plant serving the U.S., and the impact of these issues showed up again in the company’s earnings.

Sun today reported U.S. sales of $507 million, which was up 4%, in large part because of its launch of Olmesartan, a generic of blood pressure med Benicar. But the the Mumbai-based company said that its net profit for the quarter dropped about 5% to 14.72 billion rupees ($219.87 million) from 15.45 billion rupees ($231.4 million) in the same period a year ago. That was way short of the $267 million that analysts on average had forecast, Reuters reported.

The U.S. accounts for 45% of overall sales of Sun's overall sales. 

One significant factor for the decline was the ongoing problems at Halol, which the FDA had first cited in 2014. Executives today said that during the December reinspection, the FDA had added 9 observations to its list of concerns at the facility.

Sun officials said during an earnings call today that it has responded to the FDA and is currently “implementing corrective steps.” Sun executives said they are hopeful the problems can be resolved over the next few quarters so that supplies can be steadily increase and market share restored, execs said. 

Also affecting U.S. sales, was a tough pricing picture for generic drugs, Sun execs explained, something that other drugmakers, and wholesalers have also said.  

One of its highlights for the quarter were sales in emerging markets, which were up 14% to $172 million. Sun said it continues to build that business. It pointed to its deal in November to acquire an 85.1% stake in Russia’s JSC Biosintez which focuses on Russia’s hospital market. With the acquisition, Sun picks up manufacturing by at a Biosintez plant in the Penza region.