Sun Pharma rises 3%, hits over 2-year high on steady earnings visibility

The board of directors of Sun Pharma are scheduled to meet on January 29, 2021 to consider and approve Q3 results

Shares of Sun Pharmaceutical Industries rose 3 per cent to hit an over two-year high of Rs 619 on the BSE in intra-day trade on Friday on expectations of steady earnings visibility. The pharmaceutical company's stock was trading at its highest level since October 2018.

The board of directors of Sun Pharma are scheduled to meet on January 29, 2021 to consider and approve the financial results of the company for the quarter ended December 31, 2020 (Q3FY21).

Sun Pharma’s results for the quarter ended September 2020 (Q2FY21) were above analysts' estimate on all fronts, mainly on account of better-than-expected operational performance, tax gain on the creation of deferred tax assets, higher other income and lower interest expense. The company had said its sales of specialty products have improved sequentially with Ilumya and Cequa reaching pre-Covid levels.

The 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.

Sun’s specialty franchise comprises of mainly derma and ophthalmology products. Ilumya, Odomzo, Levulan and Absorica are the main derma products while Cequa and Bromsite are the main ophthalmological products. Sun’s specialty franchise generated $429 million in global sales in FY20, of which around $380 million was from the US, in our view, analysts at Edelweiss Broking said in stock update.

The brokerage firm forecasted US Ilumya peak sales at $245 million in plaque psoriasis in FY25. Factors driving the growth are high prevalence of patients with moderate-to-severe plaque psoriasis; rapid shift from conventional treatments such as anti-TNFs to modern biologicals; and better dosing frequency than most of its peers, it said.

"Sun Pharma's efforts around specialty portfolio ramp-up is yielding favourable progress as prescription trends around the key products suggest growth on a quarter on quarter (QoQ) basis. Levulan which was significantly below pre-COVID levels has broadly normalized, but we need to monitor the impact of resurgence in COVID cases," analysts at Nirmal Bang Equities said in company update.

We are in fact seeing faint signals of an unfavourable impact of the second COVID wave as trends seems to suggest weakening prescription volumes across product categories in the last week of November, the brokerage said, adding that on a QoQ basis though, the trend so far is favourable and should support sales growth, unless the resurgence in COVID incidences leads to sharp correction going forward.