Event update: Sun Pharma (Outperformer) - Tildrakizumab gets approved

Event

• Sun has received final FDA approval for Tildrakizumab (brand name ILUMYA) - it’s novel IL-23 inhabiting monoclonal antibody for the treatment of mild to severe plaque psoriasis.

Key highlights

• This approval, while broadly anticipated, marks a major milestone in Sun Pharma’s specialty foray. Ilumya along with its OTX-101 (Seciera approval expected in Aug-18) will lead Sun’s specialty business build-out in the US.
• Ilumya will be marketed by Suns dermatology field force and we expect it to be commercialised over the next couple of quarters.
• Ilumya will face tough competition from companies like Novartis, Lilly and J&J who have competing and well established drugs in this disease segment. The extent of success will be a function of Suns ability to establish the differentiation of ILUMYA wrt to its efficacy and safety profile vs peers and secure the relevant formulary listings
• As is the case with speciality drugs, ILYMYA should have gradual build-up of sales. We have assumed $25mn/ $125mn revenues over FY19E/20E with peak sales of ~$500m by 5^th-6^th year of launch.
• Currently, there is relatively limited clinical data available to compare the efficacy and safety profile of ILUMYA wrt peers but the information availability should improve closer to the launch / post launch. This will enable us to get a better assessment of ILUMYA’s peak sales potential for the plaque psoriasis indication.

Valuations & view

Sun’s speciality investments are finally nearing fruition with the receipt of ILUMYA approval (followed by a near term launch) and potential approval for OTX 101 in Aug-18. This combined with ongoing revenue contribution from Bromsite, Odomzo and Absorica will add significant heft to Sun’s speciality profile in the coming quarters and will mark a significant step-up in Sun’s speciality strategy. We maintain that Indian pharma companies need to take bold bets to transition from a pure generics to a specialty play which is a medium term strategic imperative and Sun is best placed amongst peers. While Sun’s muted 9mFY18 performance reflects the ongoing challenges in its base business, pick-up in revenue growth through a combination of generic / speciality scale-up can drive accelerated medium term earnings growth from current subdued levels of profitability. Maintain Outperformer. Securing FDA clearance for Halol and FDA approval for OTX-101 remain the key near term monitorable.