Reduce Sun Pharma; target of Rs 534: PINC Research

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Reduce Sun Pharma; target of Rs 534: PINC Research

PINC Research is bearish on Sun Pharma and has recommended reduce rating on the stock with a target of Rs 534 in its February 16, 2012 research report.

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RELATED NEWS Buy Adhunik Metaliks; target of Rs 93: Motilal Oswal Hold Tata Power; target Rs 116: SPA Research Hold Eicher Motors; target of Rs 1915: Emkay ALSO READ See previous views by PINC Research See what other Experts & Brokerages are saying about Sun Pharma See messages about Sun Pharma

PINC Research is bearish on Sun Pharma and has recommended reduce rating on the stock with a target of Rs 534 in its February 16, 2012 research report.

"Sun Pharma has announced that in the on-going patent litigation on generic Protonix in the US district court of New Jersey, Wyeth (Pfizer) has submitted expert reports claiming damages to the tune of USD960mn (Rs42/share) from Sun Pharma. Wyeth has now claimed USD2.1bn from Teva and USD960mn from Sun Pharma for the at-risk launch of generic Protonix. Thus, Wyeth in totality is claiming USD3bn for the launch. Our assessment would be that the claims from Wyeth are on the higher side on back of 1) Protonix was a USD2bn brand for Wyeth before the launch of generic. 2) Wyeth generated revenues of USD806mn (including AG contribution) from Protonix in CY2008 post the at-risk launch by Teva and Sun. 3) Sun Pharma launched the drug post the launch by Teva and AG. 4) Sun Pharma could have made profits to the tune of USD240-280mn from the launch."

"In June 2007, Wyeth filed a motion in the US Court seeking preliminary injunction against both Teva and Sun preventing them from launching the generic version of Protonix pending Court's final decision in patent litigation. In September 2007, the court denied the motion, however the court did not conclude that the patent was invalid. Teva launched at-risk the generic version of Protonix in Dec. 2007, post the approval on its ANDA in Aug 2007. Following this, Watson launched Authorised Generic (AG) in Jan 2008. Subsequently, Sun Pharma also launched the product in Jan 2008. In July 2010, the US district court upheld the jury verdict there by concluding that the Protonix patent is not invalid. As a result, Sun Pharma stopped the shipment of the product. Sun Pharma has indicated that the claim by Wyeth is overstated and continues to believe that Protonix patent is invalid. The US district court has upheld the patent as valid and now is proceeding to ascertain the damages. Sun Pharma would submit its report on the amount of damages. Post the decision by the US district court, Sun Pharma has a right to appeal in higher court on patent validity and the amount of damages."

"We expect that the claims could be in the range of USD300-500mn (Rs13-22/share), if Sun Pharma is unable to get a favourable judgment on the patent litigation. Sun Pharma has a strong balance sheet (cash of USD1bn) and the generic Protonix trial could be a long time driven process, however we expect this to be a sentimental negative for the stock. The stock is up ~8% in last one month, and is trading at 25.9x FY12E and 23.2x FY13E earnings. We maintain REDUCE on the stock with a Target Price of Rs534 (22x one year forward earnings) on back of rich valuation," says PINC Research report.

Institutional holding more than 40% in Indian cos

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To read the full report click on the attachment