Litigation settlement hits Sun Pharma's first quarter profit

Sun Pharmaceuticals, the largest Indian pharmaceutical company, has posted a net loss of Rs 1,276 crore for the first quarter ended June 30, on account of payment for settlement of US patent litigation. The firm had posted a net profit of Rs 795 crore for the corresponding period of the previous financial year.

During the quarter, Sun Pharma provided Rs 2,517 crore according to the settlement agreement entered in June 11 with Pfizer Inc USA, Wyeth LLC USA and Nycomed GmbH Germany with respect to patent infringement litigation related to generic versions of Protonix. The company had already provided Rs 584 crore in the second quarter of FY13 towards this liability.

Total income of the company rose to Rs 3,502 crore in the first quarter of FY14 from Rs 2,683 crore in the year-ago period.

According to the company, recurring net profit for the quarter stood at Rs 1,241 crore, a 56 per cent growth over Rs 795.55 crore it registered in the year-ago period, resulting in a margin of 36 per cent. According to earning estimates of various brokerage houses, Sun Pharma was to report 28-30 per cent growth in net profit at Rs 1,022-1,035 crore, after adjusting one-time litigation settlement fee.

On Thursday, Sun Pharma shares went down by 3.24 per cent on the BSE after its Israeli subsidiary Taro Pharma reported a fall in its first quarter earnings. Taro Pharmaceutical's June quarter net income stood at $58.8 million, down from $62.9 million in the year-ago period. Taro's net sales for the June quarter also dropped to $153.2 million from $159.2 million last year.

For the first quarter, Sun Pharma's US sales were at $364 million for the quarter, up by 28 per cent, accounting for 58 per cent of total sales. Branded generic sales in India, at Rs 849 crore, grew by 44 per cent over the first quarter last year while international formulation sales grew 19 per cent to $81 million over the same quarter last year.

Dilip Shanghvi, Sun Pharma's managing director, said: "All our businesses continue to perform in line with our expectations. We remain focused on strengthening our existing businesses and developing a differentiated and specialty driven product basket. We also continue to review opportunities to expand and strengthen our global footprint."

Sun Pharma holds 5.1 per cent market share in the Rs 72,000 crore Indian pharmaceutical market, according to a report by AIOCD Pharmasofttech AWACS, a pharmaceutical market research company, released in June this year.