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Shrugging off to a large extent the adverse impact of Covid-19 in the June quarter, Sun Pharmaceutical Industries (Sun Pharma) reported impressive numbers in the September quarter. The latest quarter performance was strong against both the June quarter and the September quarter last year.
The pharma major posted consolidated revenue of ₹8,459 crore in the September quarter, up over 13 per cent compared to the June quarter. The revenue growth was 6.4 per cent when compared with the September quarter.
There was significant improvement in profitability too. On a sequential basis, the company’s operating profit rose to ₹2,099 crore (up 22 per cent) and adjusted net profit to ₹1,590 crore (up 39 per cent, excluding one-off exceptional items) in the September 2020 quarter. Easing of lockdown restrictions, which led to opening of health clinics (for non-Covid treatments) and higher patient footfalls, along with cost control drove the recovery. On a year-on-year basis, the operating profit rose 30 per cent and the adjusted net profit 49 per cent.
Relief for specialty business
Significantly, Sun Pharma’s global specialty products business, seen as a critical driver of the company’s long-term growth, recovered from the impact of Covid-19. After a 38 per cent sequential decline in revenue to $78 million in the June quarter, the segment recovered in the September quarter generating revenue of $108 million, up 38 per cent sequentially this time.
In the June quarter, two of the company’s specialty products in the US, Ilumya and Levulan, which are clinically administered (the latter to a greater extent) were impacted by the lockdown-induced temporary closures of clinics. In the September quarter however, sales of Ilumya and another specialty product, Cequa, recovered to reach pre-Covid levels.
The global specialty business (US market is a large part of it) accounted for 9 per cent of the company’s consolidated revenue in 2019-20. Though a small contributor to revenue today, given the price challenges in the highly competitive US generics market, Sun Pharma has been focusing on specialty drugs as a future growth driver especially in the developed markets of the US and Western Europe.
In fact, given the significant investments being made, the overall specialty business is not yet profitable. But the company expects to break-even on certain products next year. Of the ₹613 crore (7.2 per cent of sales) that Sun Pharma spent on research and development in the September 2020 quarter, 37 per cent was incurred on the specialty business.
Entering new markets
The company’s long-term strategy on its specialty business involves not just expanding its existing product portfolio but also introducing these to newer markets such as Japan and China. Ilumya, Sun Pharma’s specialty drug for psoriasis was launched in the US in October 2018.
After receiving regulatory approvals, Sun Pharma launched the drug in Japan in September this year. While Japan relative to the US, is a smaller market for the psoriasis drug, it is a rapidly growing one. Last quarter, Sun Pharma also entered into an exclusive licensing and distribution agreement with Hikma Pharmaceuticals for commercialisation of Ilumya in West Asia and North Africa.
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