The company has already changed its distribution channels for its Indian business by disbanding sales through Aditya Medisales and bringing them in-house. As corporate governance issues get addressed, analysts at CLSA had indicated that investor attention will incrementally shift to the company’s specialty pipeline ramp-up and a pick-up in this vertical can drive a rerating.
Looking at a challenging environment on the generics front, the company has been diversifying into specialty products such as Ilumya (dermatology), BromSite, Cequa, Xelpros (all ophthalmic), and Odomzo, Yonsa (both oncology), among others.
While Ilumya product has gained substantial traction with higher usage by physicians in the US, the incremental gains are expected to be reflected in sales gradually.
Analysts at Morgan Stanley feel that the potential upside is not priced in for Ilumya that should benefit from a multi-year trend of psoriasis patient conversion to biologics, a relatively low frequency of dosing, and its niche medical benefit positioning. They estimate $30 million and $110 million in revenue for 2019-20 (FY20) and 2020-21 (FY21).
However, the increased marketing costs for specialty products such as Ilumya may entail higher marketing costs in FY20 and hence, more benefits on profitability are expected to flow in FY21.
Further, as the specialty portfolio ramps up, analysts are also awaiting key approvals such as those for generics of dermatology drugs Olux-E and Aczone, which could drive growth.
Meanwhile, the company’s US performance during the June quarter is likely to be stable after a decent March quarter showing lower competitive intensity and benefits from short-term US generic supplies.
is expected to sustain its base business growth with lower price erosion and stable Taro numbers, say analysts at Centrum Broking.
Sun Pharma’s sales, excluding Taro in the US, are expected to come in higher by 20 per cent year-on-year. This would be a six-quarter high, according to estimates by BOB Capital.
With recovery in US sales after stabilisation and good domestic growth outlook, it is not surprising that analysts are turning positive on the stock with lower valuations an added advantage.
Analysts at Morgan Stanley expect a revival of earnings from FY21. They estimate three-year (FY20-22) annual growth rate of 13 per cent in sales and 20 per cent in net profit versus two-year trailing annual decline rates of 4 per cent in sales and 21 per cent in profits.
With improved prospects for Sun Pharma
on the back of better outlook for specialty product portfolio, the prospects for SPARC, the research arm of Sun Pharma
responsible for developing specialty products, too, is expected to improve. The stock that had seen 52-week lows a few days back however, gained close to 20 per cent on Monday.