Sun Pharma might finally have a prescription for the specialty dream
Sun Pharmaceutical Industries is increasingly showing signs that it has left behind the stuttering start to its journey to become a
The drugmaker reported 6 per cent sequential growth in sales of its specialty drugs portfolio despite a decline in revenues from Absorica and Levulan in the quarter, and the impact from the Covid pandemic in the US. “We expect to gain momentum and continue our focus in building the prescriptions for our core speciality products,” CS Muralidharan, Group CFO at sun pharma told ETNow in a recent interview.
When the Mumbai-based drugmaker began its foray into specialty drugs a few years ago, the initial enthusiasm was quickly replaced with doubts, given the low offtake for some of its products and the regulatory challenges faced by its key facilities. The company’s founder and managing director, Dilip Shanghvi, tried to calm investor nerves by suggesting that the drug company was undergoing a transition with respect to becoming a global specialty drug company from a generic drug maker, which had brought it glory through the 2000s and 2010s.
HDFC Securities said a positive light was emerging. “The sustained growth in Sun Pharma’s specialty portfolio over the past five quarters reinforces our view of its ability to grow this business, which would be further aided by a ramp-up in key products, including Winlevi (recently-launched), and normalisation of patient footfalls,” said the brokerage. The ramp-up in its specialty business over the past year has increasingly turned skeptics into believers. The company has four major products in the trial phase, which suggests that the specialty drugs portfolio will continue to get refreshed. Further, it recently launched a novel anti-acne product, Winlevi, which analysts said should dovetail with its existing dermatology portfolio in the US. “We remain confident of its specialty ramp-up led by Ilumya, Cequa, Winlevi and Odomzo and expect Sun Pharma to achieve breakeven in FY23,” CLSA India said in a note. In addition to delivering on the specialty drugs front, the company is also making itself more agile with a strong balance sheet and surprisingly good margins. In the quarter ended September, Sun Pharmaceutical surprised investors by reporting a 170 basis point expansion in consolidated operating margin to 27.3 per cent despite suggestions of marketing spends to promote its specialty drugs. Group CFO Muralidharan said the company was looking at ways to improve margins, efficiency and growth in key focused markets.
That said, it is the specialty drugs business that will continue to drive investor interest in the stock that has given the third best gains over the past 12 months in the Nifty Pharma index. “We change our rating from HOLD to BUY due to more consistency on the specialty front and linear growth trajectory India formulations,” said ICICIdirect, adding that it saw a higher contribution from specialty drugs and India business.