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Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
KEY DATA
Rating BUY Sector relative Neutral Price (INR) 774 12 month price target (INR) 950 Market cap (INR bn/USD bn) 1,857/25.0 Free float/Foreign ownership (%) 45.5/11.7
What’s Changed Target Price
Rating/Risk Rating
QUICK TAKE
The going gets better
Sun Pharma’s (SUNP) Q1FY22 revenue/EBITDA/PAT beat consensus estimates by 11%/30%/40% as all businesses performed better than expectations as covid tailwinds was backed by structural recovery.
We upgrade SUNP to ‘BUY’ as: i) Ilumya outperformance and Cequa’s strong recovery to help mitigate Absorica loss; b) Winlevi boost to
derma portfolio to monetize Absorica salesforce; c) gRevlimid launch in FY23, broad-based India growth, Winlevi uptick and specialty acceleration to translate into 30%+ margin in FY24. We raise FY23E EPS by 27% due to core business improvement, gRevlimid and Winlevi. Raise multiple to 28x on consolidated EPS to account for near-term specialty losses that yields revised SOTP-based TP of INR950.
FINANCIALS (INR mn)
Year to March FY21A FY22E FY23E FY24E
Revenue 3,34,981 3,81,210 4,27,944 4,87,705
EBITDA 84,833 1,01,817 1,25,056 1,57,895
Adjusted profit 59,316 67,587 87,053 1,13,140
Diluted EPS (INR) 24.7 28.2 36.3 47.2
EPS growth (%) 47.3 13.9 28.8 30.0
RoAE (%) 6.4 13.8 15.9 18.2
P/E (x) 31.3 27.5 21.3 16.4
EV/EBITDA (x) 21.2 17.1 13.6 10.1
Dividend yield (%) 0.8 0.9 1.2 1.5
PRICE PERFORMANCE
Q1FY22 takeaways: Strong all round performance
11% top-line beat as all businesses exceeded expectations. US at USD380mn; best
performance in nine quarters driven by Ilumya that mitigated Absorica generics
impact. Ilumya doubled YoY as per secondary data. India, ex-covid, grew in double-
digits. Gross margin declined slightly due to Absorica genericization, but lower
employee costs and opex control ensured EBITDA margin beat that stood at 28.4%.
Unimpeded growth ahead as specialty builds confidence
Barring Absorica genericisation that should trough out in the next couple of quarters,
SUNP is poised for consistent growth in the next 4-5 years as its specialty portfolio
(Exhibit 3) led by Ilumya is on track to clock 20% CAGR; Eli Lilly scrapping mirikizumab
lessens potential competition. While we acknowledge that Winlevi may face
commercialization hurdles, the throughput is likely to be very high as no new
investments are to be made. Cequa has become the fastest growing molecule and
we expect strong growth till FY23 and eventual plateauing as Restasis generics hit
the market. gRevlimid launch in H2FY23 should provide comfort to US base business.
Recovery in the ex-Taro US business, steady EMs and RoW growth, solid domestic
chronic business and visible cost control are likely to provide comfort to base
business.
Explore:
Outlook and valuations: Higher revenue visibility; upgrade to ‘BUY’
We raise FY22/23E EPS by 11%/27% to factor gRevlimid and Winlevi in our forecasts
and margin expansion as specialty ramps up. Our target multiple on Dec 2022E EPS
is 28x (from 25x) as specialty’s best economics are likely to be seen only in FY25/26.
Raise TP to INR950 (fromINR675) based on 28x Dec 2022E and INR20 from gRevlimid.
Financials Year to March Q1FY22 Q1FY21 % Change Q4FY21 % Change
Net Revenue 97,187 75,853 28.1 85,230 14.0
EBITDA 27,412 17,644 55.4 20,592 33.1
Adjusted Profit 19,792 11,460 72.7 13,431 47.4
Diluted EPS (INR) 8.2 4.8 72.7 5.6 47.4
Above In line Below
Profit
Margins
Revenue Growth
Overall
36,000
39,600
43,200
46,800
50,400
54,000
450
515
580
645
710
775
Jul-20 Oct-20 Jan-21 Apr-21
SUNP IN Equity Sensex
India Equity Research Pharmaceuticals July 30, 2021
SUN PHARMACEUTICALS RESULT UPDATE
Kunal Randeria Aashita Jain +91 (22) 6620 3040 +91 (22) 6623 3463 [email protected] [email protected]
Corporate access
Financial model Podcast
Video
SUN PHARMACEUTICALS
Edelweiss Securities Limited
2 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
Financial Statements
Income Statement (INR mn) Year to March FY21A FY22E FY23E FY24E
Total operating income 3,34,981 3,81,210 4,27,944 4,87,705
Gross profit 2,48,081 2,80,840 3,18,004 3,65,693
Employee costs 68,622 72,397 77,102 82,114
R&D cost 21,028 24,779 26,533 28,775
Other expenses 73,597 81,847 89,314 96,909
EBITDA 84,833 1,01,817 1,25,056 1,57,895
Depreciation 20,800 21,352 21,902 22,452
Less: Interest expense 1,414 1,203 991 780
Add: Other income 8,355 6,034 7,187 8,295
Profit before tax 70,975 85,296 1,09,349 1,42,958
Prov for tax 5,147 12,709 17,496 25,018
Less: Exceptional item (42,825) 0 0 0
Reported profit 29,194 67,587 87,053 1,13,140
Adjusted profit 59,316 67,587 87,053 1,13,140
Diluted shares o/s 2,399 2,399 2,399 2,399
Adjusted diluted EPS 24.7 28.2 36.3 47.2
DPS (INR) 6.5 7.0 9.1 11.8
Tax rate (%) 7.3 14.9 16.0 17.5
Important Ratios (%) Year to March FY21A FY22E FY23E FY24E
Gross Margin (%) 74.1 73.7 74.3 75.0
R&D as a % of sales 6.3 6.5 6.2 5.9
Net Debt/EBITDA (0.7) (1.1) (1.3) (1.6)
EBITDA margin (%) 25.3 26.7 29.2 32.4
Net profit margin (%) 17.7 17.7 20.3 23.2
Revenue growth (% YoY) 2.0 13.8 12.3 14.0
EBITDA growth (% YoY) 21.4 20.0 22.8 26.3
Adj. profit growth (%) 47.3 13.9 28.8 30.0
Assumptions (%) Year to March FY21A FY22E FY23E FY24E
GDP (YoY %) (6.0) 7.0 6.0 0
Repo rate (%) 3.5 3.5 4.0 0
USD/INR (average) 74.2 73.0 72.0 0
India growth (%) 6.5 18.7 5.6 10.5
Exports growth (%) 0.6 12.5 16.2 16.2
US sales (USD mn) 1,360.0 1,556.0 1,831.3 2,277.7
API sales (USD mn) 263.2 293.9 327.8 360.5
Capex (USD mn) 144.6 235.6 138.9 0
Valuation Metrics Year to March FY21A FY22E FY23E FY24E
Diluted P/E (x) 31.3 27.5 21.3 16.4
Price/BV (x) 4.0 3.6 3.2 2.8
EV/EBITDA (x) 21.2 17.1 13.6 10.1
Dividend yield (%) 0.8 0.9 1.2 1.5
Source: Company and Edelweiss estimates
Balance Sheet (INR mn) Year to March FY21A FY22E FY23E FY24E
Share capital 2,399 2,399 2,399 2,399
Reserves 4,62,229 5,12,919 5,78,209 6,63,064
Shareholders funds 4,64,628 5,15,318 5,80,608 6,65,463
Minority interest 30,171 35,171 39,971 44,771
Borrowings 33,430 28,430 23,430 18,430
Trade payables 39,737 59,259 49,175 71,166
Other liabs & prov 62,151 62,151 62,151 62,151
Total liabilities 6,41,103 7,11,315 7,66,321 8,72,968
Net block 1,54,855 1,48,503 1,36,601 1,24,148
Intangible assets 62,876 62,876 62,876 62,876
Capital WIP 15,668 15,668 15,668 15,668
Total fixed assets 2,33,400 2,27,047 2,15,145 2,02,693
Non current inv 64,824 64,824 64,824 64,824
Cash/cash equivalent 95,756 1,41,545 1,81,106 2,73,297
Sundry debtors 90,614 1,14,885 1,28,969 1,46,980
Loans & advances 28,081 28,081 28,081 28,081
Other assets 89,970 94,272 1,07,535 1,16,432
Total assets 6,41,103 7,11,315 7,66,321 8,72,968
Free Cash Flow (INR mn) Year to March FY21A FY22E FY23E FY24E
Reported profit 17,964 67,587 87,053 1,13,140
Add: Depreciation 18,099 21,352 21,902 22,452
Interest (net of tax) 0 0 0 0
Others 0 0 0 0
Less: Changes in WC 25,641 (9,051) (37,432) (4,916)
Operating cash flow 61,704 79,888 71,523 1,30,677
Less: Capex (10,730) (17,201) (10,000) (10,000)
Free cash flow 50,974 62,687 61,523 1,20,677
Key Ratios Year to March FY21A FY22E FY23E FY24E
RoE (%) 6.4 13.8 15.9 18.2
RoCE (%) 13.2 15.6 18.0 20.9
Inventory days 354 335 335 335
Receivable days 101 98 104 103
Payable days 169 180 180 180
Working cap (% sales) 21.4 21.2 27.6 25.2
Gross debt/equity (x) 0.1 0.1 0 0
Net debt/equity (x) (0.1) (0.2) (0.3) (0.4)
Interest coverage (x) 45.3 66.9 104.1 173.7
Valuation Drivers Year to March FY21A FY22E FY23E FY24E
EPS growth (%) 47.3 13.9 28.8 30.0
RoE (%) 6.4 13.8 15.9 18.2
EBITDA growth (%) 21.4 20.0 22.8 26.3
Payout ratio (%) 53.4 25.0 25.0 25.0
Edelweiss Securities Limited
SUN PHARMACEUTICALS
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 3
Q1FY22 conference call: Key highlights
Global Specialty
USD148mn across all markets (USD81mn in Q1FY21). Recorded growth despite
subsequent reduction in Absorica sales. Still facing issue with reopening of
clinics. Absorica AG included in US generics.
Ilumya sales grew both YoY and QoQ. Cequa grew QoQ. Expect to clock double
digit growth in FY22
Japan- in process of getting entry into hospitals. Offtake is little slower. Australia-
continue to grow product QoQ.
Ilumya market share is 8%. IL-23 is driving market.
Ilumya- commercial segment is bigger than medicare.
Specialty R&D accounted for 26% of total R&D.
R&D molecules- Ilumya – Phase 3 clinical psoriatic arthritis- currently recruiting
patients. SCD 044 undergoing Phase 2 trial for atopic dermatitis and moderate
to severe plaque psoriasis. MM-II undergoing phase 2 trials for knee
osteoarthritis. GLP-1 agonist phase 1 trial for diabetes.
Gaining market share in Cequa. This is the second full quarter of DTC.
Expect to be EBITDA positive in FY23.
Winlevi- Several investments have to be made to familiarize doctors with the
product. Very limited option for acne with the doctors. There is always play for
new mechanism of action.
Levulan sales have normalized but not there where it should be in non-covid
scenario.
Financials
Other expenses were higher on account of higher marketing and R&D. Current
quarter expenses are restrained.
Expect expenses to increase as markets open up completely.
R&D –guidance 7-8% of sales.
India
8-10% of sales for the quarter pertain to covid.
Base business grew in double digits.
Chronic portfolio is growing well. Semi-chronic has done exceptionally well.
Acute is in-line.
SUN PHARMACEUTICALS
Edelweiss Securities Limited
4 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
Sun Pharma FY23 EPS bridge
Source: Edelweiss Research
Sun Pharma key financial metric breakdown
FY22 FY23 FY24
Revenue gRevlimid 0 7,638 25,272
Core biz 3,78,210 4,17,306 4,59,433
EBITDA gRevlimid 0 7,256 22,745
Core biz 1,01,817 1,17,800 1,35,151
PAT gRevlimid 0 5,805 18,196
Core biz 67,587 81,248 94,945
EPS gRevlimid 2.4 7.6
Core biz 28.2 33.9 39.6
Source: Edelweiss Research
28.6
36.3
2.4 1.1
4.2
0
8
16
24
32
40
FY23 EPS(previous)
gRevlimid Winlevi Core business FY23 EPS (New)
Edelweiss Securities Limited
SUN PHARMACEUTICALS
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 5
Specialty uptick progressing well
As seen in the chart below, Sun’s specialty products are likely to be key growth
drivers in the next 3 years. While Absorica is likely to trough out in the next couple
of quarters, Ilumya’s growth has been best-in-class in the last couple of quarters and
Cequa is also the fastest growing molecule in its class
Summary of US sales
FY22 FY23 FY24
Sun Base (incl. gRevlimid) 613 746 1,048
Taro 441 463 486
Dusa (Levulan) 100 99 101
Specialty ex-DUSA 403 523 643
Absorica 81 47 41
Ilumya 174 242 336
Odomzo 36 40 42
Cequa 64 96 100
Bromsite 29 18 14
Others 10 10 10
Winlevi 9 70 100
Source: Edelweiss Research
Specialty: positive trends continue in Ilumya & Cequa
Ilumya
Ilumya, which was worst hit during the pandemic, has picked up growth.
1. Sun’s specialty recovery continued strongly in Q1FY22. Ilumya +38% QoQ (+18%
QoQ in Q4FY21); its IL-23 counterpart Skyrizi has grown at +28% QoQ.
2. Sun’s Ilumya becomes the fastest growing molecule in this class. Ilumya TRx
growth in Q1FY22 was at 101% YoY. Abbvie’s Skyrizi which was growing on
similar lines is now growing slower than Ilumya at 77% YoY, albeit on a higher
base
3. We forecast peak sales of $430mn of which ~$305mn is in plaque psoriasis and
~4125mn in psoriatic arthritis indication
SUN PHARMACEUTICALS
Edelweiss Securities Limited
6 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
Ilumya performance continues to improve
Source: Edelweiss Research, Bloomberg
Ilumya becomes fastest growing molecule in IL-23 class
Source: Edelweiss Research, Bloomberg
341
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Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Jun-21
Retail TRx Insti TRx
Ilumya trajectory is picking up with Jun Qtr TRx growth at 38% QoQ/101% YoY. In Jun month, TRx grew 19% MoM; 102% YoY
784 712 771 860 896 925 842 877 1083 1033 1103 1172 12351514
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Ilumya Total TRx Skyrizi Total TRx
. Ilumya +38% QoQ; its IL-23 counterpart Skyrizi has grown on similar lines (+28% QoQ).
Edelweiss Securities Limited
SUN PHARMACEUTICALS
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 7
Ilumya market model
Ilumya in plaque psoriasis FY22 FY23 FY24 FY25 FY26 FY27
Psoriasis patients 86,15,125 88,30,503 90,51,266 92,77,547 95,09,486 97,47,223
Plaque psoriasis 60,30,588 61,81,352 63,35,886 64,94,283 66,56,640 68,23,056
- % of patients with plaque psoriasis 70% 70% 70% 70% 70% 70%
Moderate-to-severe 15,07,647 15,45,338 15,83,971 16,23,571 16,64,160 17,05,764
- % of people with moderate-to-severe plaque psoriasis 25% 25% 25% 25% 25% 25%
Untreated patients/patients on topicals 9,98,816 10,04,470 10,09,782 10,14,732 10,19,298 10,23,458
- % untreated patients 66% 65% 64% 63% 61% 60%
Patient pool 5,08,831 5,40,868 5,74,190 6,08,839 6,44,862 6,82,306
Patients on treatment 3,05,298 3,24,521 3,44,514 3,65,303 3,86,917 4,09,383
- currently receiving treatment 60% 60% 60% 60% 60% 60%
Patients on modern biologics 1,83,179 2,01,203 2,30,824 2,52,059 2,66,973 2,82,475
Patients on conventional treatments eg anti-TNFs 1,22,119 1,23,318 1,13,690 1,13,244 1,19,944 1,26,909
- % proportion on biologics 60.0% 62.0% 67.0% 69.0% 69.0% 69.0%
Patients on Ilumya 6,228 8,652 10,618 11,595 11,595 11,595
Ilumya market share 3% 4% 4.600% 4.6% 4.6% 4.6%
Average cost ($) 28,000 28,000 28,000 26,600 26,387 26,176
Ilumya revenue in plaque psoriasis 174 242 297 308 306 304
Ilumya in psoriatic arthiritis FY22 FY23 FY24 FY25 FY26 FY27
Psoriatic arthritis patients 15,45,452 15,60,906 15,76,515 15,92,280 16,08,203 16,24,285
Diagnosed 10,50,907 10,77,025 11,03,561 11,30,519 11,57,906 11,85,728
- diagnosis rate 68.00% 69.00% 70.00% 71.00% 72.00% 73.00%
Untreated patients 4,20,363 4,30,810 4,41,424 4,52,208 4,63,162 4,74,291
- % untreated patients 40% 40% 40% 40% 40% 40%
Patient pool 6,30,544 6,46,215 6,62,136 6,78,311 6,94,744 7,11,437
Patients on treatment 3,78,327 3,87,729 3,97,282 4,06,987 4,16,846 4,26,862
- currently receiving treatment 60% 60% 60% 60% 60% 60%
Patients on modern biologics 1,09,715 1,24,073 1,39,049 1,54,655 1,70,907 1,87,819
Patients on conventional treatments eg anti-TNFs
- % proportion on biologics 29% 32% 35% 38% 41% 44%
Patients on Ilumya 0 0 1,390 2,320 3,760 4,508
Ilumya market share 0.0% 0.0% 1.0% 1.5% 2.2% 2.4%
Average cost ($) 28,000 28,000 28,000 28,000 28,000 28,000
Ilumya revenue in PsA 0 0 39 65 105 126
Source: Edelweiss Research
SUN PHARMACEUTICALS
Edelweiss Securities Limited
8 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
Cequa
After volume dip seen in Jan’21 and Feb’21, Cequa clocked highest TRx in Jun’21 with
+79% YoY growth. For the quarter ended Jun’21, Cequa growth was 103%, ahead of
Xiidra’s 28% and Restasis’ 11%. Cequa list price increased by 4% in Apr’21 which
reduces Restasis list price premium from ~22% in Jan’21 to 17%. Restastis list price
increased by 5% in Jan’21.
Cequa seeing strong uptick in TRx growth
Source: Bloomberg, Edelweiss Research
Absorica (~USD135mn pre-genericisation)
Actavis which had settlement to launch on 27-Dec-2020, received final approval in
Mar’21 and launched generic Absorica on 1-April 2021. Following Actavis, Upsher
Smith launched its generic in May’21. This led to ~35% YoY decline in Absorica TRx;
however, excluding the LD ramp-up the decline in high dose TRx was ~54% in May
and Jun. ~38% of total Absorica Rx comprises low-dose Absorica (Absorica LD).
Absorica TRx declining sharply post genericisation
Source: Bloomberg, Edelweiss Research
6685
3840 43885351
5929 58816682
8095 82139562
8150 7875
9652 9101 88459583
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-20
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r-2
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-20
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-20
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g-2
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Sep
-20
Oct
-20
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v-2
0
Dec
-20
Jan
-21
Feb
-21
Mar
-21
Ap
r-2
1
May
-21
Jun
-21
CEQUA
Cequa clocked highest TRx in Jun'21 with 8% MoM growth.In Jun Qtr, Cequa TRx was 2x YoY as against 6-11% seen in other cyclosporines and 28% in Xiidra
0
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r-2
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Dec
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-21
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-21
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-21
Ap
r-2
1
May
-21
Jun
-21
TRx
Absorice high dose Absorica low dose
Edelweiss Securities Limited
SUN PHARMACEUTICALS
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 9
Winlevi: Limited potential but adds heft to derma franchise
Sun acquired the US and Canada rights of Winlevi (clascoterone), a topical cream
indicated for the treatment of acne in patients aged 12 years and older. Sun will pay
$45mn upfront, double digit royalties and milestone payments up to $190mn.
Approved in Aug-20, Winlevi will be commercially available from Q4CY21.
Winlevi is an androgen receptor inhibitor. Androgens stimulate sebaceous glands
(oil producing glands) thus making them produce more skin oil. This excess oil clogs
the pores and also makes good food for acne-causing bacteria. Thus, Winlevi inhibits
the androgen from producing excess oil. Winlevi is the first product approved in 40
years that has a unique mechanism of action.
In two Ph.3 clinical trials, Winlevi showed superiority to control arm. In first trial, at
12 weeks, 18.8% patients showed a 2 point improvement on IGA score of 0 (clear
skin) or 1 (almost clear skin) vs. 8.7% patients on the vehicle; likewise in 2nd trial,
20.9% showed 2 improvement vs. 6.6%. Treatment with Winlevi was associated with
statistically significant reductions in both inflammatory and non-inflammatory
lesions. However, as seen below, the efficacy vs. peers is not superior.
Winlevi clinical efficacy vs. peers
Clinical efficacy at Week 12 - 2 point improvement in IGA score Winlevi Epiduo Epiduo Forte Aczone
Trial 1 Trial 2 Trial 1 Trial 2 Trial 1 Trial 2
Drug 18.8% 20.9% 21.5% 30.1% 33.7% 42.0% 35.0%
Vehicle 8.7% 6.6% 5.6% 11.3% 11.0% 32.0% 38.0%
Inflammatory lesions: mean absolute (percent) reduction
Winlevi Epiduo Epiduo Forte Aczone
Trial 1 Trial 2 Trial 1 Trial 2 Trial 1 Trial 2
Drug 44.6% 29.6% 52.4% 53.4% 68.7% 46.0% 48.0%
Vehicle 36.3% 15.7% 31.8% 30.2% 39.2% 42.0% 40.0%
Non-inflammatory lesions: mean absolute (percent) reduction
Winlevi Epiduo Epiduo Forte Aczone
Trial 1 Trial 2 Trial 1 Trial 2 Trial 1 Trial 2
Drug 32.6% 47.1% 45.9% 48.1% 68.3% 31.0% 30.0%
Vehicle 21.8% 29.7% 27.8% 23.2% 37.4% 24.0% 21.0%
Source: Edelweiss Research
Winlevi peak sales calcuation
FY22 FY23 FY24 FY25 FY26 FY27
#Rx dispensed in US for acne 25 25 26 26 26 26
of which, topicals 16 16 16 16 16 16
- topicals % 62% 62% 62% 62% 62% 62%
Winlevi Rx (mn) 0.03 0.16 0.22 0.27 0.27 0.28
Winlevi ms 0.2% 1.0% 1.4% 1.7% 1.7% 1.7%
Price/Rx 300 450 450 450 450 450
Annual sales 9 70 100 122 123 125
Source: Edelweiss Research
SUN PHARMACEUTICALS
Edelweiss Securities Limited
10 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
Levulan: Reaching a plateau
Levulan Kerastick FY22 FY23 FY24 FY25 FY26
AK patients in US 41 42 42 42 43
Annual Rx 13 14 15 15 16
Patients on PDT 0.5 0.5 0.6 0.6 0.7
- patients requiring PDT treatment 4% 4% 4% 4% 4%
Levulan market share 72% 65% 60% 55% 55%
Ameluz market share 28% 35% 40% 45% 45%
Treatment cost 285 290 295 300 305
Levulan revenues 100 99 101 101 111
Ameluz revenue 39 53 67 83 91
Source: Edelweiss Research
Sun Pharma Actual vs. Estimates
Year to March Q1FY22 Q1FY21 YoY (%) Q4FY21 QoQ (%) Edel
estimates
Deviation
(%) Consensus
Deviation
(%)
Revenue 97,187 75,853 28.1 85,230 14.0 89,708 8.3 87,837 10.6
Raw material costs 26,494 19,696 34.5 22,408 18.2 23,145 14.5
Gross profit 70,693 56,157 25.9 62,822 12.5 66,563 6.2
Gross margins (%) 72.7 74.0 (129.5) 73.7 (97.0) 74.2 (146.1)
Employee costs 17,587 17,590 (0.0) 16,775 4.8 18,118 (2.9)
R&D 5,926 4,210 40.8 5,387 10.0 5,831 1.6
Other expenses 19,768 16,713 18.3 20,069 (1.5) 20,364 (2.9)
Total operating expenses 43,281 38,513 59.0 42,230 13.4 44,313 (2.3)
EBITDA 27,412 17,644 55.4 20,592 33.1 22,251 23.2 21,030 30.3
EBITDA margin (%) 28.2 23.3 494.5 24.2 404.5 24.8 340.2 23.9 426.3
Net finance income (exp) 351 520 (32.5) 301 16.6 300
Depreciation 5,032 4,959 1.5 5,535 (9.1) 5,500 (8.5)
Other income 1,525 1,528 (0.2) 1,110 37.4 1,500 1.7
PBT 23,554 13,693 72.0 15,866 48.5 17,951 31.2
Exceptionals 5,512 35,542
6,836
PBT after exceptionals 18,042 (21,849) (95.4) 9,030 (23.0) 17,951 0.5
Income tax expense 3,956 2,459 60.9 550 618.7 2,872 37.7
Tax rate (%) 16.8 18.0
3.5
16.0
Reported Net profit 14,442 (16,566) (187.2) 8,942 61.5 15,078 (4.2)
Adjusted Net profit 19,792 11,460 72.7 13,431 47.4 13,878 42.6 14,128 40.1
Adjusted EPS 8.2 4.8 73.4 5.6 47.4 5.8 43.0
Source: Edelweiss Research
Edelweiss Securities Limited
SUN PHARMACEUTICALS
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Sun Pharma segmental breakdown
Segmental Q1FY22 Q1FY21 YoY (%) Q4FY21 QoQ (%) Edel estimates Deviation (%)
Total formulations 90,816 68,709 32 79,583 14 83,525 8.7
Domestic formulations 33,084 23,884 39 26,709 24 28,900 14.5
International formulations 57,732 44,824 29 52,874 9 54,624 5.7
US generics 28,000 21,364 31 26,946 4 27,010 3.7
- Taro 110 91 22 114 -3 115 (4.1)
- Ex-Taro 270 191 41 255 6 255 5.8
Emerging Market Formulations 16,052 13,161 22 14,015 15 14,740 8.9
RoW Formulations 13,680 10,300 33 11,913 15 12,875 6.3
Total bulk 5,149 5,537 -7 4,357 18 4,984 3.3
Others 730 612 19 698 5 400 82.5
Total gross sales 96,694 74,858 29 84,637 14 88,908 8.8
Ex-Taro performance Q1FY22 Q1FY21 YoY (%) Q4FY21 QoQ (%)
Revenue 86,348 66,929 29.0 74,414 16.0
EBITDA 23,942 14,963 60.0 17,852 34.1
EBITDA margin (%) 27.7 22.4
24.0
Adjusted Net profit 16,814 8,224 104.4 10,106 66.4
Source: Company, Edelweiss Research
SUN PHARMACEUTICALS
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Financial snapshot
Year to March Q1FY22 Q1FY21 % change Q4FY21 % change FY21 FY22E FY23E
Net Revenue 97,187 75,853 28.1 85,230 14.0 3,34,981 3,81,210 4,27,944
Cost of revenue 26,494 19,696 34.5 22,408 18.2 86,901 1,00,370 1,09,940
Gross profit 70,693 56,157 25.9 62,822 12.5 2,48,081 2,80,840 3,18,004
Employee cost 17,587 17,590 (0.0) 16,775 4.8 68,622 72,397 77,102
R&D 5,926 4,210 40.8 5,387 10.0 21,028 24,779 26,533
Other expenses 19,768 16,713 18.3 20,069 (1.5) 73,597 81,847 89,314
EBITDA 27,412 17,644 55.4 20,592 33.1 84,833 1,01,817 1,25,056
EBITDA margin (%) 28.2 23.3 24.2 25 27 29
Depreciation 5,032 4,959 1.5 5,535 (9.1) 20,800 21,352 21,902
EBIT 22,380 12,684 76.4 15,057 48.6 64,034 80,465 1,03,153
Less: Interest Expense 351 520 (32.5) 301 16.6 1,414 1,203 991
Add: Other income 1,525 1,528 (0.2) 1,110 37.4 8,355 6,034 7,187
Add: Prior period items
Add: Exceptional items 5,512 35,542 6,836 -42,825 0 0
Profit before tax 23,554 13,693 72.0 15,866 48.5 28,150 85,296 1,09,349
Less: Provision for Tax 3,956 2,459 60.9 550 618.7 5,147 12,709 17,496
Less: Minority Interest -355 -7,742 (95.4) -462 (23.0) -6,191 5,000 4,800
Add: Share of profit from associates
Less: Profit from Discontinued Operations
Reported Profit 14,442 -16,566 (187.2) 8,942 61.5 29,194 67,587 87,053
Adjusted Profit 19,792 11,460 72.7 13,431 47.4 59,316 67,587 87,053
No. of Diluted shares outstanding 2,399 2,409 (0.4) 2,399 2,399 2,399 2,399
Adjusted Diluted EPS 8 5 73.4 6 47.4 25 28 36
as % of revenues
Cost of revenue 27.3 26.0 26.3 25.9 26.3 25.7
Employee cost 18.1 23.2 19.7 20.5 19.0 18.0
R&D 6.1 5.6 6.3 6.3 6.5 6.2
Total operating expenses 71.8 76.7 75.8 74.7 73.3 70.8
Gross profit 72.7 74.0 73.7 74.1 73.7 74.3
Operating profit 23.0 16.7 17.7 19.1 21.1 24.1
Net profit 14.9 (21.8) 10.5 8.7 17.7 20.3
Tax rate 16.8 18.0 3.5 18.3 14.9 16.0
Source: Company, Edelweiss Research
Edelweiss Securities Limited
SUN PHARMACEUTICALS
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Company Description Sun Pharmaceuticals is the largest Indian Pharma company with an impressive track
record of organic and inorganic growth. Various US acquisitions augment SUNP’s pipeline
with differentiated products, where SUNP has turned around business in a highly
profitable manner – Taro/ TDPL/Natco’s brands/etc. SUNP is among the first few Indian
pharma players to have shifted focus to specialty from generics. It has invested ~USD2bn
in this business so far. Within specialty, dermatology and ophthalmology are the key
investment areas. While the company has entered the commercialisation phase for most
of specialty products, it continue to, invest in development of specialty pipeline, and in
evaluating new markets for commercialising specialty products.
Investment Theme Recovery in ex-Taro US business, steady EM and RoW growth, solid domestic chronic biz
and visible cost control are likely to provide comfort to base business. But Sun’s
challenges are far from over as a) bimekizumab and mirikizumab can potentially enter
the market in CY22 competing with Ilumya; b) Absorica will face generic competition
from mid-FY22 at the latest; c) Marketing spends are likely to inch up again,
especially on the ophthal portfolio; d) R&D should increase in FY22 as Ilumya Ph.3 in
psoriatic arthritis and the in-licensed molecule from SPARC (SCD-044) continue their
trials; and e) while the US business was impressive in Q3 driven by ms gains in gLialda
and other products, continual surprises are unlikely as improvement in specialty is
set-off by modest Taro performance. Thus, while we welcome the specialty-led
recovery, we remain cautious on the sustainability in FY22.
Key Risks Better than expected pick up in specialty particularly Ilumya;
Surprise launch of product not considered in our forecasts;
Currency risk
SUN PHARMACEUTICALS
Edelweiss Securities Limited
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Additional Data Management
Chairman Israel Makov
Managing Director
Dilip S. Shanghvi
CFO C. S. Muralidharan
Click or tap here to enter text.
Auditor S R B C & Co. LLP
Holdings – Top 10* % Holding % Holding
LIC 7.37 Nippon AMC 1.22
ICICI Pru AMC 3.86 Blackrock 1.17
SBI Funds 2.03 Norges 0.75
Vanguard Group 1.63 UTI AMC 0.64
HDFC AMC 1.35 Mirae 0.59
*Latest public data
Recent Company Research Date Title Price Reco
27-May-21 Some rain, some shine ahead ; Result Update
699.5 Hold
09-Feb-21 Specialty recovery key; Company Update
586.2 Hold
30-Jan-21 Specialty drives growth; Result Update
586.2 Hold
Recent Sector Research Date Name of Co./Sector Title
29-Jul-21 Ajanta Pharma Best placed to clock consistent growth; Result Update
27-Jul-21 Torrent Pharma In-line quarter; limited earnings upside; Result Update
27-Jul-21 Dr Reddy's Labs Testing times ahead ; Result Update
Rating Interpretation
Source: Bloomberg, Edelweiss research
Daily Volume
Source: Bloomberg
Rating Distribution: Edelweiss Research Coverage
Buy Hold Reduce Total
Rating Distribution* 173 54 19 247
>50bn >10bn and <50bn <10bn Total
Market Cap (INR) 215 39 5 259
*1 stocks under review
Rating Rationale
Rating Expected absolute returns over 12 months
Buy: >15%
Hold: >15% and <-5%
Reduce: <-5%
TP515
TP575
TP500
TP380
TP380
300
395
490
585
680
775
Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21
(IN
R)
SUNP IN Equity Buy Hold Reduce0
18
36
54
72
90
Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21
(Mn
)
Edelweiss Securities Limited
SUN PHARMACEUTICALS
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