Sun Pharma shares fall 4% as management guides for single-digit revenue growth

For the March quarter, Sun Pharma reported a net profit of Rs 2,654.5 crore.

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Shares of Sun Pharmaceutical Industries fell nearly 3 percent in intraday trade on May 10 after the company guided for high single-digit annual revenue growth for FY25.

The Sun Pharma stock was trading 3.37 percent down at Rs 1,487.40 on the National Stock Exchange at 12.15 pm on May 23.

The pharma major's full-year FY24 gross sales were up 10.4 percent over the previous year and adjusted net profit up 16.5 percent.

According to analysts at JM Financial, Sun Pharma's management has projected high single-digit revenue growth for FY25, taking into account the impact of US site compliance issues. In FY24, Sun Pharma's sales of generics in the US saw a 2 percent year-on-year growth, partially attributed to regulatory challenges at its plants in Mohali, Halol and Dadra. The management has outlined ongoing efforts to improve sales from Mohali while implementing remedial actions at Halol and Dadra.

For FY25, Sun Pharma has earmarked 8-10 percent of sales for research and development (R&D), surpassing FY24's 6-7 percent. This increase reflects advancements in its specialty pipeline, currently undergoing trials. Notably, 42 percent of R&D expenditure in the fourth quarter was allocated to specialty products.

The management also said that its specialty product Nildegy would be filed with European authorities on June 3. It also intends to license GLP-1, a diabetes and weight loss drug formulation, from innovator companies. Its own GLP-1 has completed phase 1 trials.

In FY24, Sun Pharma achieved over $1 billion in sales in the global specialty segment, bolstered by intensified product offerings and marketing efforts in regulated markets. Analysts at Nuvama observed that the company appears to be in an investment phase, with significant capital allocation towards novel assets, potentially impacting near-term earnings. Therefore, the PDUFA (Prescription Drug User Fee Act) date for Sun Pharma in July 2024 is anticipated to be a pivotal event.

JM Financial analysts anticipate rapid scaling up of deuruxolitinib in the emerging alopecia areata (hair loss) market due to its superior efficacy compared to competitors.

Additionally, analysts at ICICI Securities expect marketing investments towards its specialty portfolio to rise in the near term.

For the March quarter, Sun Pharma reported a net profit of Rs 2,654.5 crore. The profit was aided by a 62 percent jump in its other income, which stood at Rs 606 crore compared to Rs 373 crore in the year-ago quarter. Revenue for the quarter stood at Rs 11,983 crore.