Sun Pharma gains on US launch of Leqselvi, analysts see strong upside

Sun Pharma rises 2.7% as it launches Leqselvi in US following settlement with Incyte, with analysts projecting $200-300 million revenue from the drug in 3-5 years

India’s largest drug-maker Sun Pharmaceutical Industries (Sun) gained 2.7 per cent on Tuesday and was the highest gainer among Sensex stocks. The gains come after the pharma major entered into a settlement and licence agreement with Incyte Corporation over a litigation related to hairfall branded drug Leqselvi (Deuruxolitinib). The company has now launched the specialty product in the US market.

 

The settlement gives Sun a limited, non-exclusive licence to US patents covering the drug for non-oncology indication. This includes alopecia areata, an auto-immune disease that causes hair loss.

 

While the details are not known, Sun will make an upfront payment and ongoing royalties to Incyte in exchange for the licence to the patents. Sun had acquired Concert Pharma (Deuruxolitinib was its lead drug) in January 2023 for $576 million in addition to $252 million in milestone payment. Concert Pharma was in a patent dispute with Incyte, which had said that Concert’s product infringed on some of its patents. 

 

The settlement, according to Ashika Institutional Equities, resolves a key legal overhang, and enables a clean launch path for Leqselvi in the US. Deuruxolitinib’s entry strengthens Sun’s US specialty portfolio and will have a positive impact, it said. 

 

Elara Securities believes that the launch of the product could be a major opportunity for the company in the US market. Analysts led by Bino Pathiparampil estimate that the product can become a $200 million-$300 million opportunity in the next three-to-five years from launch. It could become the second-largest product for Sun after psoriasis drug Ilumya, they added. The brokerage has an “accumulate” rating on the company, with a target price of ₹1,871 per share.

 

In addition to this, the near-term trigger for the stock would be the results for the first quarter of 2025-26 (Q1FY26). The company, according to Emkay Research, is expected to witness a sequential uptick of 5 per cent in US sales to $488 million led by higher specialty sales as well as increased traction for the generic version of Revlimid.

 

The company is expected to deliver healthy double-digit growth in the domestic market for the eighth consecutive quarter, said Shashank Krishnakumar and Bhavya Gandhi of the brokerage. It expects a 60-basis point (bp) year-on-year (Y-o-Y) decline in operating profit margin given higher research and development (R&D) as well as launch-linked investments (Leqselvi and cancer drug Unloxcyt).

 

While the company’s facility at Halol in Gujarat continues to get repeat observations from the US drug regulator, brokerages do not expect the impact to be significant. Nomura Research believes that since December 2022 levels, the exempted products (allowed for sale to the US given shortages) have witnessed a 76 per cent erosion in sales.

 

The exempted products possibly contribute just $10 million-$15 million in sales currently and hence any disruption on these products is unlikely to have any material negative impact, said analysts led by Saion Mukherjee of the brokerage. The brokerage does not expect any material upside from new product approvals from the site. It has a “neutral” rating on the stock with a March 2026 target price of ₹1,970.