Sun Pharma rallies 8% in 2 days on heavy volumes; stock nears 52-week high

Sun Pharma announced that its subsidiary Taro Pharmaceuticals USA Inc has completed the acquisition of subsidiary companies of Galderma

Shares of Sun Pharmaceutical were up 3.5 per cent at Rs 885.80 on the BSE in Wednesday's intra-day trade, surging 8 per cent in the past two trading days, amid heavy volumes. The stock of the drug maker was close to its 52-week high level of Rs 902.50 touched on February 4, 2022.

At 10:18 am, Sun Pharma was 3 per cent higher at Rs 880.50 on the BSE. In comparison, the S&P BSE Sensex was up 1 per cent at 53,958 points. A combined 3.2 million equity shares had changed hands on the counter in the first hour of trade on the NSE and BSE.

In the past three months, Sun Pharma has outperformed the market by gaining 16 per cent, as against an 8-per cent decline in the benchmark index.

On Tuesday, the company announced after market hours that its subsidiary, Taro Pharmaceuticals USA Inc, has completed the acquisition of subsidiary companies of Galderma. It paid $99.279 million for the entire transaction.

On February 22, Sun Pharma SUNP, through its wholly owned subsidiary Taro Pharma, had signed a definitive agreement with Galderma to acquire the latter's subsidiary Alchemee along with its global business and assets. Alchemee (formerly The Proactiv Company) has a 25-year-old global acne-care brand ‘Proactiv’ in the OTC and non-prescription skincare markets.

Under its flagship brand Proactiv, Alchemee has a portfolio of cleanser (Benzoyl Peroxide 2.5 per cent), toner and repairing treatment (Benzoyl Peroxide 2.5 per cent). These three steps are formulated to work together to treat and prevent breakouts for most skin types, especially oily and combination skin.

Analysts at BOB Capital Markets maintain their target price of Rs 1,045 on Sun Pharma and continue to value the stock at an unchanged 18x FY24E EV/EBITDA multiple, a 30 per cent premium to largecap peers such as Cipla and Dr Reddy's due to its high-margin specialty presence in the developed markets of the US, Europe and Japan.

Analysts at ICICI Securities also maintain a 'buy' rating on Sun Pharma with a target price of Rs 1,075 per share on the back of consistent traction on the specialty front, linear growth in India formulations besides calibrated approach in generics. "Higher contribution from specialty & strong domestic franchise is likely to change the product mix towards more remunerative businesses by FY23," the brokerage firm said.

"Sun has embarked on a strategy to in-license latest generation patent protected products from various innovators for India market. In US, Sun is diversifying into specialty products like Ilumya, Levulan, BromSite, Cequa, Xelpros, Odomzo, Yonsa, Winlevi, etc. Launch momentum in India (25 launches in Q3), pick-up in demand for chronic and sub-chronic segment backed by high PCPM to sustain growth," it said in December quarter result update.