Sunpharma vs Cipla Q3 FY24

Sun Pharma reported Q3 FY24 consolidated revenue of INR 12,157 crore, up 9.5% YoY, driven by strong specialty sales (up 26.1% to $296M) and India formulation growth of 11.4%. EBITDA margin expanded 140bps to 28.1%, aided by better product mix and lower material costs. Adjusted PAT grew 19.7% to INR 2,594 crore. U.S. specialty continued to perform well, though generic business remained flattish due to Halol/Mohali plant issues. Management highlighted a healthy pipeline, including Nidlegy filing in Europe and Phase II/III starts for MM-II and GL0034 in H2 2024. The Taro merger at $43/share offers strategic benefits. Key risk: ongoing regulatory challenges at Mohali plant may delay generic supply recovery.

Guidance read

R&D spend to touch lower end of 7% guidance for FY24: Management indicated that R&D spend for the full year is expected to reach the lower end of the 7% of sales guidance. Phase II/III trials for MM-II and GL0034 to start in H2 2024: Phase III for MM-II and Phase II for GL0034, initially expected early 2024, are now slated to begin in the second half of 2024. Nidlegy filing with European authorities in H1 2024: Partner product Nidlegy is expected to be filed with European authorities during the first half of 2024.

Risk read

Key risks include Mohali plant supply constraints persist — Supplies from Mohali plant are not normal; issues with product prioritization and quality clearances are causing delays.; CEQUA facing increased competition in dry eye space — CEQUA's market share has declined due to generic Restasis and new entrants with different mechanisms of action.; Red Sea supply chain disruption risk — Management is monitoring the Red Sea situation; potential for shipment delays if situation does not normalize.; Taro merger may not receive minority approval — The $43/share offer requires approval from Taro's minority shareholders; failure could derail the merger..

Promise ledger

Of 1 tracked promise, management 0 met, 0 close, 1 missed.

Cipla delivered a strong Q3 FY24 with revenue of INR 6,544 crore (+14% YoY) and EBITDA margin of 26.3%, driven by market-leading growth in India (+12%), an all-time high US revenue of $230 million (+18% YoY), and robust SAGA performance. The India chronic portfolio outpaced the market, while US growth was fueled by seasonality and Lanreotide (20% market share). Management guided FY24 EBITDA margins at the higher end of 23-24% and expects Q4 seasonality weakness. Key pipeline updates include Symbicort filing, Advair filing by mid-FY25, and four peptide launches in FY25. Risks include US FDA observations at Indore (warning letter) and Goa facilities, potential pricing compression in US generics, and delays in Abraxane launch.

Guidance read

FY24 EBITDA margin at higher end of 23-24%: Full-year EBITDA margin trending at the higher end of the previously guided range of 23-24%. Advair filing by mid-FY25: Advair generic expected to be filed by mid-FY25 from an alternate site, with approval likely by end of next fiscal. Four peptide launches in FY25: Four peptide launches planned in FY25, with one asset awaiting approval expected in Q1 FY25. Symbicort filing completed: Filed generic Symbicort and one other inhalation asset; second site transfer to be added before approval.

Risk read

Key risks include US FDA warning letter at Indore facility — Indore facility received a warning letter citing Albuterol complaints; resolution timeline uncertain and may impact future approvals.; Goa facility re-inspection uncertainty — Goa facility due for re-inspection; delay or adverse outcome could further delay Abraxane launch.; US generic pricing compression — Pricing environment in US generics is in a downcycle; compression expected to move from 4-6% to 6-8% within a year.; Abraxane launch delay — Abraxane launch via third-party transfer is taking longer; fastest route is from Goa facility, which is subject to FDA inspection..

Promise ledger

Of 3 tracked promises, management 0 met, 0 close, 3 missed.