Sun Pharma - Wyeth claims USD960mn damages for Protonix; Maintain 'REDUCE'; TP Rs534

PINC Quick Bite - Sun Pharma

Wyeth claims USD960mn damages for Protonix

Sun Pharma has announced that in the on-going patent litigation on generic Protonix in the US district court of New Jersey, Wyeth (Pfizer) has submitted expert reports claiming damages to the tune of USD960mn (Rs42/share) from Sun Pharma. Wyeth has now claimed USD2.1bn from Teva and USD960mn from Sun Pharma for the at-risk launch of generic Protonix. Thus, Wyeth in totality is claiming USD3bn for the launch. Our assessment would be that the claims from Wyeth are on the higher side on back of 1) Protonix was a USD2bn brand for Wyeth before the launch of generic. 2) Wyeth generated revenues of USD806mn (including AG contribution) from Protonix in CY2008 post the at-risk launch by Teva and Sun. 3) Sun Pharma launched the drug post the launch by Teva and AG. 4) Sun Pharma could have made profits to the tune of USD240-280mn from the launch.

We expect that the claims could be in the range of USD300-500mn (Rs13-22/share), if Sun Pharma is unable to get a favourable judgment on the patent litigation. Sun Pharma has a strong balance sheet (cash of USD1bn) and the generic Protonix trial could be a long time driven process, however we expect this to be a sentimental negative for the stock. The stock is up ~8% in last one month, and is trading at 25.9x FY12E and 23.2x FY13E earnings.

We maintain REDUCE on the stock with a Target Price of Rs534 (22x one year forward earnings) on back of rich valuations.

Source : Equity Bulls

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