Stock Review: SUN PHARMA

scrips have been sought after in recent times, as they are a good defensive bet in a falling market. Companies in the sector have been in the news, whether it was Cadila's acquisition in the US or the USFDA approval for antibacterial levofloxacin generics, that will boost many Indian firms such as Dr Reddy's, Wockhardt and Lupin. Last week, Sun Pharma received a USFDA approval to launch anti-migraine drug sumatriptan succinate in injectibles form through an auto-injector.

The annual sales for sumatriptan injection in the US were almost $190 million according to the company release. The approval for Sun's product is the first abbreviated new drug application (ANDA) goahead for a sumatriptan auto-injector, though there are eight players for the injectible generics in the US. Sun's generic will be packaged in a single dose syringe with an auto injector equivalent to Imitrex (6mg per 0.5 ml) brand marketed by GlaxoSmithKline Pharma. Hence, now there will be two auto-injector players in the US, including the innovator GlaxoSmithKline.

The auto-injector is a better delivery system as the injection is in the form of pre-filled syringes. These can be administered by the patients themselves. This convenience is leading to a faster switch to auto injectors from conventional injections, which typically need to be administered at a dispensary. However, Sun may face competition from Zonevix's Sumavel, that is a needle-free sumatriptan formulation.

But analysts at Edelweiss estimate that Sun Pharma's product can gain 12-15 per cent market share, that can bring incremental profits of `75-80 crore for Sun Pharma from the US market.

While Sun has met with success in sumatriptan, its anti-diabetic metformin ANDA has been challenged by Depomed. However, analysts at MF Global do not see any major impact to Sun's earnings or stock price due to this.

Sun Pharma is on a high growth path on account of its strong domestic performance (20 per cent plus as compared to 15 per cent industry average), global growth powered by its performance in the US and further benefits accruing from the Taro acquisition. The sumatriptan approval will further strengthen US revenue prospects. At current levels, the stock trades at 24 times FY12 estimated earnings. Analysts believe that most of the positives are priced into the stock, and there is a limited upside from the current prices.