Sun Pharmaceutical Industries ' fourth quarter consolidated profit shot up 124.63 percent sequentially (down 44 percent year-on-year) to Rs 888 crore. Weak operational performance dented bottomline on year-on-year basis. This was the first quarter when combined earnings reported (Sun Pharma and Ranbaxy).
Speaking to CNBC-TV18, Uday Baldota, CFO, Sun Pharma said the decline in sales, integration costs impacted the margins in Q4. According to him, it is difficult to indicate FY16 integration costs at this point. The company is making all efforts to resolve issues with respect to its Halol facility, he added.
With regards to Ranbaxy acquisition, Baldota said given the complexity of the merger, it is difficult to give guidance for FY16, adding that the company is undertaking remediation plans for all Ranbaxy facilities.
Below is verbatim transcript of the interview:
Q: The street was mainly disappointed with the operational numbers this quarter, what resulted in margins crunching down to that 14.5 percent this quarter versus 30 percent in the previous quarter?
A: We have clarified that there are largely three elements, one is the decline in the sales which has hurt the margins and the other factors are harmonisation of the policies across the two companies and some costs, which are related to integration and the deal. So we have clarified that some of these costs has gone and hurt the margins.
Q: What kind of one-off integration cost can we expect in all of FY16, could it be as much as it was in Q4?
A: It is difficult for us to give a specific indication of what those costs will be or how much these cost will be. We need to wait and see but there would be some cost.
Q: What is the guidance that the company expects in FY16 in terms of margins, do you expect the margins to recover and if so by how much and by when?
A: For FY16 we have not given any specific guidance on any number. So we will need to wait to see what the numbers come for the quarters.
Q: Overall on the guidance the company has refrained from giving overall FY16 guidance, why has the company refrained from doing so and when do you think you will be ready to provide guidance?
A: We have been fairly clear on the call that given the complexity of the merger and so many moving parts in the business, I think it is difficult for us to give a very clear guidance for FY16. The way I see it for the entire year FY16 we are unlikely to give any guidance.
Q: What is the update on the Halol facility? The company’s margins were impacted because of the remediation measures that you took, can you detail what kind of remediation measures you undertook and what is the status of the plant for example when can we hear back from the USFDA on those issues?
A: Post the oratory that you received, there is a fairly intense remediation effort that is ongoing and that effort continues. All the commitment that we have given to the FDA, we are in the process of fulfilling those, it is difficult in such a case to predict as to when will the final resolution happen.
Q: Are you producing for the US from the Halol facility currently?
A: That is correct.
Q: What is the status with the Ranbaxy facilities in Dewas, in Paonta Sahib and Mohali?
A: There is a remediation plan for each of those facilities and that is moving forward.
Q: This quarter what impacted the US sales and when can we expect it to normalise for example, supply constraints etc?
A: US primarily got impacted by a couple of factors; one was the supply constraint that we have highlighted. The other is price erosion on a few products as well as loss of exclusivity on product. So it was a mix of all of these things that impacted the US sales.
Q: Similarly with India’s sales decline around 11 percent sequentially this quarter, what is the guidance for FY16, what is the run-rate we can expect in FY16? Is there any overlap of products, sale representatives and other factors that the company might need to take care of?
A: We have not given guidance for FY16 overall as well as for any business. There is discussion about the distribution and that is the reason why these sales are lower in Q4. How the full year FY16 would behave again would be difficult for me to say.
Q: What is the status of MK-3222?
A: MK-3222 is moving ahead on schedule and we continue to invest increasing some on the clinical developing programme and that is one of the reasons why you see R&D expenditure growing up. This quarter it was 9.4 percent so I think we are moving ahead well on the product.
Q: Is there a chance of outlicensing it?
A: It is a bit premature for us to answer that.
Q: What kind of first-to-file pipeline do you have? Launches such as Gleevec we know are lined up in FY16. Can you describe what the opportunity is here and what the overall pipeline has?
A: Generally, we don’t comment on specific product or specific product approval, so it would be difficult. We have quite a few products, which need approval with the FDA and as and when we receive those approvals, we will bring the products to markets.
Q: A sense of the large combined entity, is the company in line to achieve USD 250 million synergy in three years post Ranbaxy integration, also give us a broad direction of your vision, your plan?
A: There is a strong integration effort on the organisation right now to get both the businesses work together and it is progressing quite well.
I would say that 250 million synergy that we have mentioned is something that we continue to aim for and are quite hopeful that we will be able to get there.
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