Sun Pharmaceutical Industries Ltd (SUNPHARMA) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day and welcome to the Sun Pharma's Q2 FY '27 financial results conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Dr. Abhishek Sharma, Vice President and Head of Investor Relations and Strategic Projects. Thank you, and over to you, sir.
Abhishek Sharma (Sun Pharmaceutical Industries Ltd): Thank you. Good evening, and a warm welcome to our second quarter FY '27 earnings call. I am Abhishek from the Sun Pharma Investor Relations team. We hope you have received the Q2 financials, the press release and the earnings presentation that was sent out earlier in the day. These are also available on our website. We have with us, Mr. Dilip Shanghvi, Chairman; Mr. Kirti Ganorkar, Managing Director; Ms. Jayashree Satagopan, CFO; and Mr. Richard Ascroft, CEO, North America. Today, the team will provide an update on the financial performance and business highlights for the quarter, pipeline updates, and respond to any questions that you may have. We will refer to the consolidated financials during management comments. The call recording and call transcript will also be put on our website shortly. The Organon acquisition is subject to satisfaction of the remaining customary closing conditions, as and is on track to close by early 2027. Organon has already announced their corresponding quarter results. Since Organon remains a separate public-listed company, we will not be taking any questions today regarding Organon's business performance. The discussion today might include certain forward-looking statements
Abhishek Sharma (Sun Pharmaceutical Industries Ltd): and these must be viewed in conjunction with the risks that our business faces. You are requested to ask two questions in the initial round. I also request all of you to kindly send in your questions that may remain unanswered today. I will now hand over the call to our CFO, Miss. Jayashree Satagopan.
Jayashree Satagopan (Sun Pharmaceutical Industries Ltd): Welcome and thank you all for joining us for the earnings call after the announcement of the financial results for the second quarter FY '27. The financials are already with you. Let me take you through the key consolidated financials. During the second quarter of FY '27, sales were at ₹161,000 million, registering a growth of 11.8% vis-à-vis Q2 FY '26. Gross margin was at 80.8% for the quarter, higher than the same period last year, largely on account of a better product mix and favorable currency tailwinds. EBITDA for the quarter was ₹47,439 million, an increase of 4.8% over Q2 last year. EBITDA margins came in at 29.3%. While EBITDA margins are lower year-on-year, please note that Q2 FY '26 had some benefit from lenalidomide sales. Adjusted for lenalidomide, EBITDA growth has outpaced revenue growth. Forex gain for the quarter was ₹785 million, which is lower than Q2 of last year. Reported net profit after tax for Q2 FY '27 was ₹19,885 million, while adjusted net profit for the quarter was ₹31,620 million. EPS for the quarter was ₹8.3 per share. Exceptional items for the second quarter includes provision towards a litigation settlement and on account of Organon related acquisition costs. Effective tax rate for the quarter was 28.3% versus 24.7% in Q2 FY '26. Balance sheet continues to be strong, with a net cash of $3.3 billion at the consolidated level. Now, let me take you through the half-yearly performance. For the first half, sales were at ₹312,836 million, registering a growth of 11% over the first half last year. Gross margin was at 80.6% for the first half. EBITDA for the first half was ₹91,615 million, registering a growth of 3.8% over the first half of last year. EBITDA margin percentage was at 29.1%. Adjusted net profit for H1 was ₹62,515 million. The successful subscription of Sun Pharma's debut NCD issue underscores the strength of its credit profile and the broad investor confidence in the company's financial position. I will now hand it over to Kirti who will share the performance of our Global Innovative Medicines business and India business.
Kirti Ganorkar (Sun Pharmaceutical Industries Ltd): Thank you Jayashree. I shall first provide you an update on Global Innovative Medicine. In Q2 FY '27, our Innovative Medicine sales were up 6.9% to reach US$356 million. The business accounted for 21.1% of Sun sales for the quarter. The performance in Innovative Medicine continues to be driven by growth across US and ex-US market, across products notably Ilumya, ex-US, Cequa, Odomzo. We are pleased to note that Ilumya is now approved in US for the treatment of adults with active psoriatic arthritis. Introducing a healthcare provider-administered IL-23 inhibitor broadens our treatment portfolio and creates new opportunities to strengthen patient support and health, healthcare team engagement. We are planning for a soft launch in November with a full launch in the following months. Ilumya continues to do well across international market. As a highlight, recently Japanese Society for Psoriasis Research announced that Ilumya to be number two across all biologics in the new patient across 73 main hospital in Japan, making a significant improvement over
Kirti Ganorkar (Sun Pharmaceutical Industries Ltd): last year. During the quarter, partnership with Lip Therapeutics strengthened our innovative medicine portfolio and expanded our presence in the rapidly growing PCSK9 market outside US and China. Lerodolcib adds to a differentiated once monthly therapy that can help address significant unmet needs in cholesterol management. Now coming to India business. The sales of India formulations were Rs. 55,523 million for the quarter, recording a growth of 17.3%. India sales accounted for 34.5% of total consolidated sales for the quarter. Sun Pharma is ranked number one and holds 8.6% market share in over Rs. 2,618 billion Indian pharmaceutical market, as per Pharmatrac, MAT September 26. Corresponding market share for the previous period was 8.3. For the quarter ending September 26, we grew higher than IPM, and we have done well across all major representated therapy areas. Sun Pharma's 15.1% Pharmatrac, September 26th growth was driven primarily by strong volume expansions. Sun's volume growth was 6.7% for the quarter compares favorably to IPM growth of 1.8%. As per SMSRC March-June 26 report, we continue to be number one company based on prescription volumes. Sun Pharma is also ranked number one by prescription with 12 different doctor categories. For Q2 FY27, the company launched 15 new products in India. Regarding Organon, integration planning for the Organon acquisition continues to progress across functions and work stream in line with plan. Regulatory approvals have now been secured in majority of the regions, with the remaining jurisdiction tracking on schedule. We are now on track to close the transaction as per earlier communicated timeline, that is Q4 of FY27. I will now hand over call to Rick for update on the US market.
Richard Ascroft (Sun Pharmaceutical Industries Ltd): Thank you, Kirti. Let me share performance highlights for our US business. Overall, the US business reported sales of $455 million for the quarter, declining by 8.2%. This decline is largely due to lenalidomide erosion. On a quarter-over-quarter basis, the US business has grown by 6.5%. The US accounted for 27% of consolidated sales for the quarter, and we launched five products, generic products in the US during this quarter. This quarter we saw a slowdown in Ilumya business in the US driven by a mix of factors. This is a key reason behind slower growth in global innovative medicines. We put actions in place to improve performance and anticipate further growth from these as well as the new psoriatic arthritis indication that Kirti mentioned earlier. The rest of our innovative medicines portfolio in the US continues to show strong growth. I also want to provide some recent updates on UNLOXCYT. UNLOXCYT elevation to a category 2A preferred recommendation in the NCCN Guidelines reinforces its growing clinical relevance in advanced CSCC. Subsequently, we presented long term follow up data on UNLOXCYT at a leading scientific conference in Europe. Long term data showed complete responses in 34% of locally advanced and 17% to 21% of metastatic patients on UNLOXCYT. Additionally, the product profile continues to excel on tolerability, with a very low level of high grade immune-related adverse events. These data reinforce the potential of UNLOXCYT in advanced cutaneous squamous cell carcinoma. During the quarter, Sun Pharma also announced agreements with the US government aimed at prioritizing access to affordable medicines for American patients. According to the White House, 25 other pharma companies have signed similar agreements. As part of the agreement, Sun Pharma will extend Most Favored Nation pricing to state Medicaid programs. This agreement delays Section 232 tariffs on innovative products for over 2 years and exempts Sun Pharma from the GLOBE and GUARD Medicare models. I will now hand over the call to Kirti for updates on the rest of our business.
Kirti Ganorkar (Sun Pharmaceutical Industries Ltd): Thank you Rick. I will provide an update on the performance highlights of our other businesses. Our formulation revenue in emerging market were US$ 350 million, up by 7.6% over Q2 last year. The underlying growth in a constant currency term was 7.4%. Emerging markets accounted for 20.7% of total consolidated revenue for Q2.
Kirti Ganorkar (Sun Pharmaceutical Industries Ltd): While branded generics has continued to grow, innovative medicines has been an important driver for growth in emerging markets, with Ilumya doing well across several markets such as Romania and Brazil. Our partner also launched semaglutide generics in Brazil during the quarter. Formulations revenues in rest of the world for the quarter were US dollar 241 million, higher than Q2 last year. Rest of the world markets accounted for approximately 14.3% of consolidated revenue. I will now hand over call to Mr. Dilip Shanghvi for updates on R&D.
Dilip Shanghvi (Sun Pharmaceutical Industries Ltd): Thank you, Kirti. Let me discuss a various R&D initiatives and how how we are doing. We continue to invest in building an R&D pipeline for both the global generics and innovative medicine businesses. Consolidated investments towards R&D for Q2 '27 stands at Rs 7,784 million or 4.8% of sales. Innovative R&D accounted for 32.4% of our total R&D spend. This numbers are tracking lower than our intended R&D spend, but we expect the second half of the year to catch up some of this R&D spend.
Abhishek Sharma (Sun Pharmaceutical Industries Ltd): That's the end of our prepared remarks. Operator, if you can request for Q&A lineup.
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