Sun Pharma slips 5% as US court bars it from launching alopecia drug

Given the investments of around $576 million and the peak revenues potential upwards of $200 million, four years down the line, ICICI Securities expects some negative impact on the company

Shares of Sun Pharmaceutical Industries slipped 5 per cent to Rs 1,766.15 on the BSE in Monday’s intra-day trade on profit booking after the US District Court of New Jersey has decided to grant a preliminary injunction delaying the launch of Leqselvi (Baldness treatment) in the US.

 

As a result of the court's decision, Sun Pharma has been temporarily barred from launching Leqselvi until a subsequent favorable court decision or until the expiry of patent in lawsuit, whichever is earlier; the company said in an exchange filing. Sun has decided to appeal this decision.

 

Sun is yet to launch this product after it first received the motion seeking a preliminary injunction filed to prevent the launch on August 1, 2024. The management has already spelled out contingency plans in case of an unfavourable verdict, during its Q2 earnings call. One of those is the possibility of an out of court settlement before the patent expiry in December 2026. 

 

 

ICICI Securities, in a note, said that they haven’t considered the full effect of the potential sales either (25 per cent probability). Nevertheless, given the investments (or around $ 576 million) and the peak revenues potential (upwards of $200 million four years down the line) with better margins profile, the brokerage firm expects some negative impact on sentiments.

 

At 09:30 AM, Sun Pharma was trading 3 per cent lower at Rs 1,801.55, as compared to 0.86 per cent decline in the BSE Sensex. The stock has corrected 10 per cent from its record high level of Rs 1,960.20 hit on September 30, 2024. However, thus far in the calendar year 2024, Sun Pharma has rallied 43 per cent, as against 9 per cent rise in the benchmark index.

 

Over the past few years, Sun Pharma's dependency on US generics has reduced and the company’s growth is more functional on specialty drugs, RoW and domestic pharma business that have strong growth visibility.  Though FY25 expenses may remain elevated given the company is in an investment phase to ramp up specialty pipeline, a timely launch of Leqselvi along with progress of other pipelines will be key to Sun Pharma’s specialty pipeline beyond FY25, analyst at Prabhudas Lilladher said in Q2 results update.