Sun Pharma's Leqselvi launch in US faces legal roadblock; analysts cautious

Sun Pharma's plans to launch Leqselvi, a drug for alopecia areata, in the US have been put on hold after a court there granted a preliminary injunction in favour of Incyte Corporation. Alopecia areata is an autoimmune disease that causes hair loss when the body's immune system mistakenly attacks hair follicles.

 

The injunction was granted by the US district court of New Jersey in response to a patent infringement lawsuit filed by Incyte Corporation, which claims Leqselvi infringes on its patent, which is set to expire in December 2026.

 

This decision delays Sun Pharma's planned US launch of the product, which could be deferred for several months if the company wins its appeal, or up to two years if it loses the case entirely. On Monday, Sun Pharma's stock price fell by 2.68 per cent to Rs 1,808.95. The New Jersey court’s decision also puts pressure on Sun Pharma to negotiate a settlement with Incyte, which could involve royalty payments in exchange for an earlier launch date.

 

Sun Pharma, which acquired Leqselvi through its $576 million acquisition of Concert Pharmaceuticals in March 2023, had received the US Food and Drug Administration (FDA) approval for the drug in July 2024.

 

Market analysts anticipated that Leqselvi would contribute $90 million in sales for FY26 and $125 million for FY27, with projected earnings per share (EPS) gains of 5-8 per cent over these years. However, these estimates are now in question as the delay could impact the product’s revenue contributions and overall market position. Elara Capital downgraded Sun Pharma to “Reduce”, with a target price of Rs 1,871.

 

Sun Pharma has stated its disagreement with the court's decision and intends to appeal immediately. “We respectfully disagree and intend to immediately appeal this decision,” the company stated in its exchange filing on BSE. The company will be unable to launch Leqselvi until the patent expires or a favourable ruling is achieved.

 

Emkay Global Financial Services, in its recent report, noted that the likelihood of a settlement has increased with the injunction due to the looming patent expiration and the existence of similar royalty agreements between Incyte and other pharmaceutical companies.

 

Despite the potential delay, Emkay Global analysts downplay the long-term impact, suggesting the injunction is net present value (NPV) neutral as it is likely to only affect the initial scale-up of the drug. However, a delay beyond FY27 could significantly impact future earnings estimates. 

WORRYING FACTS

Delay could impact product’s revenue contributions and overall market position, says Elara Capital

Emkay Global sees increased chances of a settlement with Incyte, possibly through a royalty agreement to secure an earlier launch

Emkay analysts caution that setbacks beyond FY27 could hit future earnings