Sun Pharma's 2018 sales may fall as US market gets tougher

India's largest drug group Sun Pharmaceutical Industries said that its US sales might fall this year because of pressure on drug prices, signalling tough market conditions in the United States for generic drugmakers.

“The US generics industry is facing rapidly changing market dynamics, (and) increased competitive intensity and customer consolidation is leading to pressure on pricing,” Sun’s Managing Director Dilip Shanghvi said on a call with analysts after the company reported lower than expected fourth-quarter earnings. “We may even have a single digit decline in consolidated revenue for full-year 2018 versus full-year 2017.”

The world’s fifth-largest generic drugs maker is the latest to offer a bleak US forecast, echoing recent comments by rivals Dr Reddy’s Laboratories and Lupin.

India’s nearly $16 billion drugs industry faces an uncertain future in its largest export market, the United States.

A wave of consolidation between the US drug distributors has hit the negotiating power of drugmakers. There is also uncertainty around big healthcare policy changes by the US President Donald Trump
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“For many things there is a new normal that is getting established,” Sun’s Shanghvi said in response to analysts queries on how the company planned to deal with the increasing challenges. “We are clearly at the level of profitability where we were 12 years back ... we need to execute better.”

Sun’s plan, like that of other large Indian drugmakers, is to make niche products where there's less competition, such as for ophthalmology and dermatology.  Sun has been working on fixing problems at its western India-based Halol plant, where the US Food and Drug Administration has raised concerns about quality control violations. Shanghvi said that the company was continuing to fix those issues as it awaited another inspection, which it had no visibility on.

It is also partnered with the US firm Merck & Co Inc on developing tildrakizumab, a new drug for psoriasis that Shanghvi said might be launched next year.

Hit by a 34% fall in U.S. sales, Sun's profit for the quarter ended March fell 14% to Rs 1,224 crore ($189.94 million), lower than the Rs 1,500 crore that 21 analysts polled by Thomson Reuters expected, on average.

Sales in its second-largest market, India, were up 10 percent, but the business will face a one-time hit from a nationwide tax reform that the government plants to implement July onwards, Shanghvi said.