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We perceive Sun Pharmaceuticals’ (SUNP) exclusive worldwide licensing deal with Merck for Tildrakizumab is another transformational step like its recent Ranbaxy acquisition. It not only takes the company closer to evolving into a specialty player, but also on approval (2016/2017) the drug could become a meaningful addition to its business. We are upbeat on the company’s capital allocation policies and believe that it will continue to be on the prowl for exciting opportunities (given large cash) that will drive long-term value, as in the past.
Inks exclusive marketing deal with Merck for psoriasis drug
SUNP has bagged exclusive worldwide commercialisation rights for Merck’s Tildrakizumab (MK-3222, details on Page 3) undergoing Phase III trials (details on page 4) for the treatment of chronic plaque psoriasis (details on Page 2-4) for an upfront payment of USD80mn. Merck will receive milestones and tiered royalties (mid-single digit through teen) on sales and will continue all clinical development/regulatory activities, which will be funded by SUNP. On approval (possible in FY16/17), SUNP will also be responsible for all regulatory activities, including subsequent submissions, pharmacovigilance, post approval studies, manufacturing and commercialisation. The global psoriasis market is large and is expected to touch USD8bn by CY16.
What’s the big deal?
(a) step towards becoming a specialty company, expect more activity towards this effort in the future; (b) SUNP is the first Indian company to own worldwide rights for a Phase III drug, and on approval will be first to commercialise a novel medicine in regulated markets; (c) Tildrakizumab (an IL-23 blocker) is expected to have fewer side effects than existing products (Humira, Enbrel) and could garner peak sales of USD500mn-1.5bn (20-60% of FY14 sales); (d) strengthens its existing branded derma franchise (DUSA, Ranbaxy’s derma franchise including Absorica); (e) further upside if other potential indications for Tildrakizumab including psoriatic arthritis and Crohn’s click in the future; (f) for the ongoing two Phase III trials (c2000 patients), we believe SUNP may need to spend another USD200-300mn over next 2-3 years before filing.
Financials
| Year to March | FY13 | FY14 | FY15E | FY16E |
|---|---|---|---|---|
| Revenues (INR mn) | 112,999 | 160,804 | 185,590 | 206,633 |
| EBITDA (INR mn) | 49,749 | 71,956 | 84,123 | 94,041 |
| EPS (INR) | 17.1 | 25.6 | 31.8 | 37.2 |
| P/E (x) (based on recur. EPS) | 46.6 | 32.7 | 25.0 | 21.5 |
| ROE (%) | 26.0 | 31.4 | 30.7 | 28.3 |
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LINK
https://www.edelweiss.in/research/Sun-Pharmaceuticals--It's-a-big-deal;-event-update/27093.html
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