NEW DELHI: Domestic drug major Sun Pharmaceutical’s $485 million settlement of antitrust litigations in the US will not cause any material financial stress or pose constraints to the firm’s plans for strategic investment, Nomura said.
“We think the Street will treat this as a one-off. As of Dec 2021, the company has net cash of USD2.1bn, and on ex-Taro basis net cash was USD767mn, according to the company,” the global research firm wrote.
Sun Pharmaceuticals announced the settlement on Wednesday.
The pharma major was faced with a class action suit put forward by purchasers and payers in the US who had alleged violation of antitrust laws regarding Abbreviate New Drug Applications by Ranbaxy for three drugs – Valsartan, Valgancyclovir and Esomeprazole.
Sun Pharma is one of the parent companies of Ranbaxy.
According to Nomura, the settlement made by Sun Pharma- while a one-time negative development for the firm- removes the uncertainty of larger liabilities that could have arisen if the drug major lost the litigation.
“The rejection of summary judgment, and a jury trial had increased the risk of liability for Sun Pharma,” Nomura wrote.
“The risk was also elevated given the large size of the drugs in this litigation, and hence the potential liability/damages. The three products involved in the litigation had cumulative sales of ~USD5.9bn during the period, when the plaintiffs claim to have overpaid.”
The complainants had alleged that Ranbaxy had providing incorrect information to the USFDA and that consequently a delay in the entry of generic competition had led to higher market prices.
Providing an estimate of how much higher the potential damages could have been for Sun Pharmaceuticals, Nomura said that the plaintiffs in the case could have claimed a potential loss of $1.5 billion.
“Triple damages would then result in liability of USD4.4bn. Even excluding gDiovan, where we think Sun Pharma had a very strong case, the brand sales for the gNexium and gValcyte were USD2.2bn during the claimed overcharging period.”
Following its assessment of the development, Nomura maintains a ‘Buy’ rating on Sun Pharmaceutical’s stock with a target price of Rs 1,094. Shares of Sun Pharma were last trading 0.5 per cent lower at Rs 903 on the BSE.
“The stock is currently trading at 26.3x and 22.7x FY23F and FY24F EPS (earnings per share) of INR34.2 and INR39.6, respectively,” the global research firm said.
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