No-near term upsides for Sun Pharma Advanced
The delay in commercialisation of near-term opportunities will hurt the firm as well as Sun Pharma
The Sun Pharma Advanced Research Company’s (SPARC’s) plan to seek site transfer for two of its products from Halol will lead to a delay in their commercialisation. The stock, which lost about seven per cent in trade on Thursday prior to an investor update, could come under further pressure going ahead. SPARC was spun off as a separate entity from Sun Pharma in 2007 with a focus on drug discovery and innovation.
The two drugs, Xelpros and Elepsia, are used in treating glaucoma and epilepsy respectively. These are near term opportunities for the company with a sales potential of $50 million each. The marketing partner for both the drugs is Sun Pharma, which has licenced the product from SPARC. The importance of these two drugs has gone up as Sun Pharma looks at specialty products to shore up its revenues, given the severe pricing erosion it has witnessed in the US market. Specialty products offer a more sustainable pricing and margin advantage compared to generics, which are facing competition from multiple products on the back of higher generic approvals by the US FDA. How quickly the company is able to undertake the site transfer will be critical both for SPARC as well as Sun Pharma, which has indicated towards single-digit decline in sales during FY18. In addition to these drugs, analysts expect Sun to be working on another epilepsy drug and asthma allergy drug to be launched by the end of FY18. This should provide some respite to the prevailing weak sentiments on Sun’s prospects.
In addition, there are some products in the respiratory segment that are in the late stage of research and would be next in line for a potential launch. Analysts say SPARC is consulting the European Union regulatory agencies to understand the path forward for approval of all three strengths of respiratory drug SalmeterolFluticasone Dry powder inhaler. Further, another product in the pipeline related to gastro treatment, namely Beclofen GRS, is also in the late stages of development as recruitment has been completed for all Phase-3 studies in the US. The management has, in an investors’ conference call, indicated peak sales of $100 million with 2535 per cent prescription share. Analysts say this product is already a generic one in the US, with a total market of $100 million. Since SPARC‘s product is a once-a-day application, the company plans to achieve the$100-million sales via premium pricing. Given the delay in some of the near-term opportunities, investors are better off awaiting clarity on launches, before taking any exposure to SPARC.