Brokerages rolled out neutral calls for drugmaker Sun Pharmaceutical Industries after the company expressed uncertainty over the launch of its specialty drug Leqselvi, despite getting a go-ahead from the US Food and Drug Administration (USFDA).
Leqselvi is prescribed for the treatment of severe alopecia areata and is projected to generate around $200 million in sales over the next three to four years for Sun Pharma. Likewise, analysts have huge expectations of the drug boosting Sun Pharma’s specialty sales in the coming time.
The drug also received approval from the US regulator last week; however, it got caught in a preliminary injunction sought by US pharma company Incyte, which claims infringement of its patent. This has muddled the drug's launch timeline.
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Even though Sun Pharma stated that it will oppose the infringement case filed against the drug, it still remains uncertain over the probable launch of Leqselvi, which has triggered caution among brokerages. "The launch of Leqselvi is contingent on a favourable judgment or settlement fee. We note that a costly or delayed settlement can lead to a drop in Leqselvi’s net present value (NPV)," Nuvama Institutional Equities highlighted in a note. Based on that, the brokerage retained its 'hold' call on the stock with a price target of Rs 1,636, implying a near 5 percent downside from current levels.
Nomura also pointed out that Sun Pharma is entering a high-investment phase (higher R&D, more clinical development) and the revenue growth in specialty is slowing on a relatively higher base. The firm feels that concerns about Sun Pharma's specialty business may rise particularly if Leqselvi's revenue growth is slow. On that account, Nomura also held on to its 'neutral' call on Sun Pharma with a price target of Rs 1,444, which implies a downside potential of nearly 16 percent from current levels.
Along similar lines, Systematix Shares and Stocks (India) also tweaked its forecasts on Sun Pharma to account for the delay in Leqselvi, consolidation of Taro, but slightly raised its full-year growth forecast for India branded formulation to 12 percent from 10 percent earlier. The brokerage retained its 'hold' call on Sun Pharma with a price target of Rs 1,671, leaving room for a potential downside.
Sun Pharma had reported a strong 40 percent year-on-year growth in its Q1 FY25 net profit to Rs 2,836 crore, up from Rs 2,023 crore in the same quarter the previous year, surpassing market expectations. The company's revenue for the April-June quarter saw a 6 percent rise, coming at Rs 12,653 crore compared to Rs 11,941 crore a year earlier. A Moneycontrol poll of 13 brokerage estimates had predicted Sun Pharma's fiscal first-quarter net profit to be Rs 2,579 crore and revenue to be Rs 12,904 crore.
At 09:32 am, shares of Sun Pharma were trading marginally higher at Rs 1,722 on the NSE.
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