Sun Pharma: M&A focus on Specialty and Ems

14 Feb 2024 , 02:13 PM

Analysts of IIFL Capital Services hosted Sun Pharma at IIFL’s Investor Conference in Mumbai. Sun to focus on Specialty & Complex generics and will continue to evaluate potential acquisitions along with in-licensing deals to further strengthen US Specialty portfolio. The company is particularly looking at Derma and Ophthal assets in the Speciality business. Given the high cost of developing biosimilars and fairly high price erosion, mgmt has prioritised Specialty over Biosimilars and will enter the market once the company has bio-manufacturing capacities. Sun’s focus will remain on prescription led growth in India and expect it to be in-line or above IPM growth going ahead. Analysts of IIFL Capital Services believe Sun will continue to do well on the back of growth momentum sustaining in Speciality business, reducing dependency on US generics and double-digit growth in India business. 

Focus on prescription led growth in India: 

Over the years, volume growth and new launches have accounted for three-fourths of Sun’s India business vs two-thirds for IPM. Sun’s focus will remain on prescription led growth in India and expect it to be in-line or above IPM growth going ahead. Part of the 20% MR addition is to increase penetration in tier 2/3 markets. Although, Sun has some exposure towards trade generics which came as a part of Ranbaxy acquisition but trade generics has become a smaller piece of the business given mgmt’s focus on branded generics in India. 

Will continue to invest in Specialty business and EMs through potential M&As: 

Sun’s focus has shifted to specialty and complex generics and the incremental filings has been towards complex portfolio. Sun is particularly looking for specialty assets in Derma and Ophthal. The upcoming triggers for Specialty is the PDUFA date for Deuruxo in Jul’24 and EU filing for Nidlegy in 1HCY24. Ilumya’s psoriatic arthritis recruitment has picked up in non-eastern EU markets and US, which should lead to higher R&D spends going ahead. Mgmt expects gradual recovery at Mohali plant (QoQ sales in 3Q has been flat) and is yet to invite USFDA for inspection. 

Sun to prioritise Specialty over Biosimilars, given Sun doesn’t have internal manufacturing capacities and will be looking to acquire biologics manufacturing capacities. The double whammy in the biosimilar market is the high cost of development per biosimilar which is around USD80-100m per product along with fairly high price erosion of biosimilars with a prime example of bHumira where innovator is protecting the market share given it wants to upgrade the patients with another product.