Sun Pharma’s competitor in US markets, Hikma Pharmaceuticals, has again increased its 2013 guidance for its generics division on doxycycline upside. Revenue guidance has been updated for its generics business to $230 million for 2013 (up from $200 million in July and $104 million in March).
Hikma’s raised guidance implies that doxy prices will remain high compared to February 2013, when prices shot up 500% due to drug shortage) for the balance of the year.
URL/Mutual (acquired by Sun in Dec’12) is a beneficiary of doxycycline hyclate shortage since it has 19.9% market share. Based on Hikma’s current market share and guidance, Sun could gross approximately $120 million in revenue with high margins (approximately 7% of FY14 estimated earnings per share).
We reiterate ‘overweight’. Sun’s business growth drivers are intact. High-quality domestic formulations, RoW and non-Taro US; and the new drivers are shaping up well. The company continues to build a pipeline of complex generics to ensure longer-term growth.
We have assumed a $100 million doxycycline contribution in our model for FY14, which has upward bias if the current pricing continues.