Sun Pharma has been stung by a decade-old pay-for-delay lawsuit, one of a host of issues that contributed to a 74% slide in its profit last quarter for India's largest drugmaker, even after the litigation cost was backed out.
The drugmaker made the $150 million payment to resolve antitrust litigation in the U.S. over narcolepsy drug modafinil, a generic of Provigil. Mylan, which was also a defendant in the case, settled earlier this year for $96.5 million.
Drugmakers, including Ranbaxy, which Sun Pharma bought in 2014, were sued by wholesalers more than a decade ago for alleged agreements with Cephalon to delay the release of generic-version drugs. Cephalon is now part of Teva and the Israeli drugmaker previously covered Cephalon’s exposure, paying $512 million to plaintiffs in April 2015 and a whopping $1.2 billion the next month to settle with the FTC.
The litigation charge, however, was just one of a host of issues that whiplashed Sun in its last quarter. With its sales already handcuffed in the U.S. by FDA manufacturing restraints, its revenues in its largest market cratered from the generics pricing pounding that also battered its peers.
“Our Q1 performance was not good and not in line with our past performance due to the combined impact of increasing investments in our global specialty business, temporary disruption in our India business due to GST implementation, a challenging U.S. generic pricing environment and the Modafinil settlement,” CEO and Sun founder Dillip Shanghvi said in a statement. “We expect our performance to gradually improve in the second half of this year.”
The company reported that its U.S. sales fell 42% to $351 million. That represented 37% of it its total revenues of $961 million. In the past, the U.S. market made up about half of the sales for the world’s fifth largest generics maker. Its adjusted net profit fell 74% to $82 million, half of what analysts expected.
This has become a recurring theme for the world’s fifth-largest generics maker as its efforts to satisfy FDA concerns over issues at is crucial plant in Halol, India, have dragged on for years now. Those problems have prevented the drugmaker from launching new drugs from Halol that could be boosting its top line.
The FDA raised concerns about the facility in 2014 and slapped it with a warning letter citing a variety of issues. The company has spent millions of dollars on consultants and system upgrades.
Sun believed that with all of that effort, a return visit by FDA inspectors late last year would finally clear the plant of its regulatory overhang. Instead, the FDA cited the facility again, leaving Halol in limbo for new drugs while the company continues to address issues.