Sun Pharma Earnings Preview: India, global specialty sales may offset Taro weakness

Taro Pharma lost nearly all of its operating profit during the December quarter as it continued to experience pricing pressure, particularly in the US generics business.

For Sun Pharma growth will be led by its global sales of specialty drugs like illumya, cequa and winlevi. Specialty business in the September quarter had risen 27.5 percent year-on-year to $200 million.

Analysts believe that global specialty sales for Sun Pharma will cross the annualised run rate of $1.1 billion in financial year 2025 from the current levels of $780 million.

While the US base business may be weighed down by pricing pressure, the launch of the colon drug Pentasa generic and Amphotericin B Liposome generic will contribute to the overall US business. Sun Pharma's US formulations business contributes to 30 percent of the overall topline.

Growth in the India business will be led by new launches. Estimates for this particular geography are ranging from high-single-digits to 10 percent year-on-year.

EBITDA margin is likely to remain flat on a sequential as well as year-on-year basis. However, it will remain around the mark of 27 percent.

Sun Pharma's R&D expenses stood at only 5 percent of revenue during the first half of the year, which is below the company's guidance of 7-8 percent. Commentary on ramping up R&D spends would be awaited.

Commentary will also be awaited on the timeline for resolving the USFDA import alert for its crucial Halol facility. The US drug regulator had issued a warnings letter to the facility in December last year, noting that the company failed to perform operations within specifically defined areas of adequate size, and failed to use equipment in the manufacturing process, packing, and holding of drug products that are appropriate.

Some other factors to watch out for would be the management commentary on illumya, overall sales in the specialty business, and any outlook on the margin profile.

Shares of Sun Pharma have gained nearly 27 percent over the last 12 months, outperforming the Nifty Pharma index.