Sunpharma vs Cipla Q1 FY25

Sun Pharma reported a solid Q1 FY25 with consolidated sales of INR 12,524.5 crore (+6.3% YoY) and EBITDA margin expansion of 60 bps to 28.5%. PAT surged 40.2% YoY to INR 2,835.6 crore, aided by lower base and operational leverage. India formulation grew 16.4% YoY to INR 4,144.5 crore, gaining market share to 8.6%. U.S. sales were flat at $466M, with specialty up 14.7% to $266M, driven by Ilumya and other products. Key highlight was FDA approval of Leqselvi for alopecia areata, though a preliminary injunction motion by Incyte may delay launch. Management guided for higher R&D spend in subsequent quarters (8-10% of sales) and expects tax rate to normalize. Risk: Leqselvi launch uncertainty due to litigation could impact near-term specialty growth.

Guidance read

R&D spend to step up to 8-10% of sales for FY25: Management expects R&D investment to increase in subsequent quarters, with full-year guidance of 8-10% of sales. Effective tax rate to increase on full-year basis: Tax rate expected to rise due to expiry of certain exemptions; should be viewed on an annualized basis. Leqselvi launch pending court decision on preliminary injunction: Launch timing of Leqselvi will be governed by court ruling on Incyte's motion; company opposes and seeks early outcome.

Risk read

Key risks include Leqselvi launch delay due to litigation — Incyte filed a preliminary injunction motion to block Leqselvi launch; outcome uncertain and could delay revenue contribution.; Halol plant re-audit timeline uncertain — Management plans to request FDA re-audit once ready, but no specific timeline provided; pending approvals may impact U.S. generic pipeline.; U.S. generic revenue flat despite Revlimid contribution — U.S. generic sales were flat sequentially; Revlimid contribution was not large this quarter, and sustainability is uncertain..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.

Cipla delivered a strong Q1 FY25 with revenue of INR 6,694 crore (+7% YoY) and EBITDA margin of 25.6% (+154 bps YoY), driven by a favorable product mix and calibrated pricing. North America hit an all-time high of $250 million (+13% YoY), supported by Lanreotide generic launch and Albuterol market share gains to 17%. India branded prescription grew 10% YoY, while trade generic transition was completed, impacting near-term growth. PAT stood at INR 1,178 crore (17.6% of sales). Management guided EBITDA margin of 24.5%-25.5% for FY25 and expects U.S. sustainable run rate of $235-240 million. Key risks include Goa facility FDA classification (six 483 observations) and potential price erosion in Albuterol with new entrants.

Guidance read

EBITDA margin guidance of 24.5%-25.5% for FY25: Management reiterated EBITDA margin range of 24.5%-25.5% for the full year, despite strong Q1 performance. U.S. sustainable quarterly run rate of $235-240 million: Expect U.S. business to settle at $235-240 million per quarter going forward, excluding one-time benefits. Two peptide launches expected in H2 FY25: Two additional peptide products are expected to launch in Q3 and Q4 of FY25, with two more following in subsequent years. Advair filing by end of 2024, potential launch in H1 CY2025: ANDA filing for Advair expected by December 2024 or January 2025, with potential launch in first half of calendar 2025.

Risk read

Key risks include Goa facility FDA classification pending — Goa facility received six 483 observations after U.S. FDA reinspection; official classification awaited, which could impact product approvals.; Potential price erosion from new Albuterol entrants — New competitors entering the Albuterol inhalation market could lead to price erosion and market share loss, though management notes market expansion.; Lanreotide supply constraints limiting ramp-up — Supply from partner is constrained, leading to gradual ramp-up for Lanreotide generic; capacity limitations may cap near-term revenue.; Trade generic transition disruption — Transition to new distribution model caused temporary softness in trade generic business; recovery expected but execution risk remains..

Promise ledger

Scorecard data is being built as historical quarters are processed.