Prabhudas Lilladher has a reduce call on Sun Pharmaceutical Industries Ltd.
with a target price of Rs 447.
The current market price of Sun Pharmaceutical Industries Ltd.
is Rs 474.5 Time period given by the brokerage is Two Years when Sun Pharmaceutical Industries Ltd.
price can reach defined target.
.
Sun Pharmaceutical Industries Ltd., incorporated in 1993, is a larg-cap company with a market cap of Rs 113739.92 crore.
Investment rationale by Prabhudas LilladherSun Pharmas partner Cipher, in their 1Q earnings conference call, highlighted sharp decline in their licensing revenue due to fall in Absorica (Isotretinoin) royalty.Absoricas licensing revenue decreased to US$2.1m for Q1CY18, Vs US$5.6m for Q1CY17.
The market share and prescriptions for Absorica decreased in Q1CY18.
Absorica's (market size of US$150160m) market share, which peaked at 25% during 2017, ended at approximately 1112% in Q1CY18, similar to the levels experienced prior to the promotional campaign.Dr Reddys Zenatane (a competitive drug to Absorica) exited the market in 2017.
Sun Pharmas strategy to make a significant correction in its copay program, inorder to increase profitability, could have caused them to lose market share in the drug.
With Dr Reddys exit, Sun Pharma could have gained market share inIsotretinoin, but managements belief that volumes wouldnt be impacted with reduction in copay program, led to decline in Suns market share in the molecule.Both, Akorn (from 25% to 41%) and Mylan (from 12% to 11%) with aggressive strategies, gained market share, while Dr.
Reddy and Sun Pharma lost market share in Q1CY18.
Sun Pharma reduced shipments to their distributors as inventory levels were adjusted to reflect the previously mentioned decrease in demand.Cipher expects Absorica sales to be muted for this quarter as well.
We believe Sun Pharma, being marketing partner for this product, would face the heat in Q4FY18 and going forward.
The stock currently trades at 29x and 26x FY19E and FY20E respectively.
We maintain our rating Reduce with TP at Rs447.