Sun Pharma to increase R&D investment in specialty and generics businesses

Global pharma major Sun Pharmaceutical Industries has guided for high single-digit topline growth in financial year 2023-24 (FY24), and has indicated that there would be more investments in clinical trials and innovation for its generic and specialty businesses.  

This planned increase in spending, the company said, would primarily focus on developing additional indications for its dermatology products Deuruxotinib and Ilumya, as well as conducting additional studies on diabetes drug GLP-1.  

“We continue to invest in building research and development (R&D) pipeline for both the global generics and specialty business. Our current generics pipeline for the US market includes 97 Abbreviated New Drug Application (ANDAs), an application for a U.S. generic drug approval for an existing licensed medication or approved drug, and 13 NDAs (new drug application) awaiting approval with the US FDA. Our specialty R&D pipeline includes five molecules undergoing clinical trials. In the future, R&D investments are likely to increase both for our specialty and generic businesses,” said Dilip Shanghvi, Managing Director of Sun Pharmaceutical Industries, in the investor call after the Q4 results.   

Sun Pharma’s consolidated R&D investment in Q4 stood at Rs 665 crore, which was 6.2 per cent of sales, compared with to Rs 670 crore or 6 per cent of sales in Q3.  

“On the guidance for FY24, we expect high single digit consolidated topline growth for FY24. All our businesses are positioned for growth. Ramp up in our global specialty business is expected to continue. The R&D investments will continue to be 7–8 per cent of sales next year,” Shanghvi said.  

In Q4, Sun Pharma’s revenues grew 15.7 per cent YoY to Rs 10,931 crore, EBITDA margins expanded 111 basis points (bps) YoY to 25.9 per cent and adjusted profit after tax (PAT) increased 36.9 per cent YoY to Rs 2,166 crore. The company’s revenue was driven by the global specialty business along with market share gain in India and growth in emerging markets.    

Dermatology products Ilumya and Winlevi and ophthalmic product Cequa remained key growth drivers in the US formulations business during the quarter, with global IIumya sales in FY23 standing at $477 million, which translates to a growth of 51 per cent YoY.   

Pharma analysts are upbeat on the stock. ICICI Direct maintained a ‘buy’ rating as the global specialty portfolio maintains momentum, growth in India formulations from new launches, field force expansion and revenue mix continues to tilt towards more remunerative businesses. Motilal Oswal said Sun Pharma remains well placed to scale up the specialty portfolio.    

“It (Sun Pharma) is also making efforts to introduce new products and develop existing products for alternate indications. While higher R&D spent may affect near-term margins, it would strengthen Sun Pharma’s positioning in innovative products offerings on successful clinical outcome. Niche launches such as like that of g-Revlimid (cancer drug) would enable better sales and profitability prospects in the US generics segment,” said Tushar Manudhane, research analyst at Motilal Oswal.  

Also read: Coal India OFS: Non-retail portion subscribed 3.46x; retail investors can bid on Friday, says DIPAM Secy