On Feb 1st, Sun Pharma launched Gleevec generic in the US - and the 180 day exclusivity period garnered something like $400m in revenues and $300m in profits for Sun Pharma.
That exclusivity period ended on 1st August - and the market has assumed that Gleevec will no longer contribute to Sun Pharma! The reality however, is that while Gleevec price may fall because of greater competition post exclusivity end, more people will shift to generic version. Plus Sun Pharma has a huge margin on the generic, so it is well positioned to lower prices aggressively and capture greater market share. I expect that the actual profits for Sun Pharma from Gleevec will continue at a $150m per quarter run rate.
But Gleevec is not the real story. Literally a day after Gleevec exclusivity ended, the FDA approved Sun Pharma's application for Glumetza. Diabetes is a much bigger market than leukemia, so it is likely that even if there is some slack in Gleevec, it will more than be offset by Glumetza.
Sun Pharma is also in advanced stages of sorting out the issues at Halol, and they should get approval from FDA any time in next couple of months.
This is India's largest pharma company, and is well positioned in US as well as other international markets also. They have a fantastic R&D pipeline, and their success with Gleevec and Glumetza will allow them to augment research dollars, which bodes well for the future.
They have also more or less completed the integration of Ranbaxy, and will reap the benefits of this in a big way going forward.
All said, current weakness in Sun Pharma gives an excellent opportunity to accumulate the stock at a reasonable multiple. Being a defensive play, Pharmaceuticals are good additions to the portfolio if you expect market volatility.
It is also likely that attempts by the US to lower costs of medical care, and to restructure Obamacare will make the playing field more friendly for generics. In any case, this is going to happen one way or the other, and being the largest company in India and the 5th largest in the world, and operating in all important geographies, Sun Pharma is the obvious choice to participate in this space.
That exclusivity period ended on 1st August - and the market has assumed that Gleevec will no longer contribute to Sun Pharma! The reality however, is that while Gleevec price may fall because of greater competition post exclusivity end, more people will shift to generic version. Plus Sun Pharma has a huge margin on the generic, so it is well positioned to lower prices aggressively and capture greater market share. I expect that the actual profits for Sun Pharma from Gleevec will continue at a $150m per quarter run rate.
But Gleevec is not the real story. Literally a day after Gleevec exclusivity ended, the FDA approved Sun Pharma's application for Glumetza. Diabetes is a much bigger market than leukemia, so it is likely that even if there is some slack in Gleevec, it will more than be offset by Glumetza.
Sun Pharma is also in advanced stages of sorting out the issues at Halol, and they should get approval from FDA any time in next couple of months.
This is India's largest pharma company, and is well positioned in US as well as other international markets also. They have a fantastic R&D pipeline, and their success with Gleevec and Glumetza will allow them to augment research dollars, which bodes well for the future.
They have also more or less completed the integration of Ranbaxy, and will reap the benefits of this in a big way going forward.
All said, current weakness in Sun Pharma gives an excellent opportunity to accumulate the stock at a reasonable multiple. Being a defensive play, Pharmaceuticals are good additions to the portfolio if you expect market volatility.
It is also likely that attempts by the US to lower costs of medical care, and to restructure Obamacare will make the playing field more friendly for generics. In any case, this is going to happen one way or the other, and being the largest company in India and the 5th largest in the world, and operating in all important geographies, Sun Pharma is the obvious choice to participate in this space.
Sun Pharma - Gleevec ends, now Glumetza
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