Sun Pharma's Q2-FY25 Results Beat Estimates Driven by Strong US Sales and Innovative Medicines

Sun Pharmaceutical Industries announced robust financial results for the second quarter of Fiscal Year 2025 (Q2-FY25), surpassing both internal and Bloomberg consensus estimates on the revenue front by approximately 2 percent. The company achieved a healthy margin of 28.3 percent, slightly exceeding expectations. Notably, Research and Development (R&D) spending stood at 5.4 percent, significantly below the management's initial guidance for FY26F (Financial Year 2026 Forecast) of 6-8 percent. This has led to a revision of the R&D guidance to the lower end of that range, which is expected to provide some margin cushion despite a planned $100 million investment in sales and distribution (S&D) in FY26F.

The United States business demonstrated strong performance with a 5 percent quarter-on-quarter growth, reaching $496 million against an estimate of $485 million. This growth was primarily propelled by key products including Ilumya, Cequa, and Odomzo. The contribution from the generic Revlimid (gRevlimid) remained flat quarter-on-quarter. A significant milestone was achieved as sales from innovative medicines in the US surpassed generic sales for the first time in Q2-FY26. The global innovative medicines business reported a solid 7 percent quarter-on-quarter increase, largely driven by Ilumya. Odomzo, a drug in the hedgehog inhibitor segment, holds over 60 percent market share in the European Union and over 50 percent among dermatologist prescribers in the US.

Sun Pharma's business in India continued its strong momentum with double-digit growth of 11 percent year-on-year, primarily fueled by volume increases and successful new product launches. However, a potential downside risk identified is a slowdown in the specialty portfolio.

**Impact** This news is positive for Sun Pharmaceutical Industries' stock performance. The better-than-expected results and strong US growth suggest effective business strategies. The lower R&D guidance, while needing monitoring for future innovation, offers immediate margin benefits. Investors will closely watch the specialty portfolio's performance and overall execution. **Rating**: 8/10

**Difficult Terms** * **Q2-FY25**: Second quarter of the Financial Year 2025 (typically April 2024 to September 2024). * **Revenue**: The total income generated by a company from its normal business operations. * **Bloomberg Consensus (BB)**: The average forecast of financial results provided by financial analysts surveyed by Bloomberg. * **Margin**: A measure of profitability, indicating the percentage of revenue that remains after deducting costs. Here, it refers to operating margin. * **bps (basis points)**: A unit of measure equal to 1/100th of a percentage point. 30 bps is equivalent to 0.30%. * **R&D (Research and Development)**: Expenses incurred by a company to discover new products or improve existing ones. * **Management's guidance**: A forecast or projection provided by a company's leadership regarding future financial performance. * **FY26F (Financial Year 2026 Forecast)**: The company's prediction for its financial performance in the fiscal year starting April 1, 2026. * **Cushion to margin**: A buffer that helps protect or improve profit margins. * **Sales and Distribution (S&D)**: The activities involved in selling products and ensuring they reach the customers. * **q-o-q (quarter-on-quarter)**: A comparison of a metric from one quarter to the immediately preceding quarter. * **US business**: Operations and sales within the United States. * **Ilumya, Cequa, Odomzo**: Specific brand names of pharmaceutical drugs. * **gRevlimid**: The generic version of the drug Revlimid. * **Innovative medicine**: New, often patented drugs representing significant therapeutic advancements. * **Generics**: Medications with the same active ingredient as brand-name drugs, sold after patent expiration, usually at a lower cost. * **Hedgehog inhibitor segment**: A class of drugs targeting a specific biological pathway involved in cell growth, often used in cancer therapy. * **EU**: European Union. * **Dermatologist prescribers**: Doctors specializing in diagnosing and treating conditions related to skin, hair, and nails. * **India biz**: Business operations and sales within India. * **y-o-y (year-on-year)**: A comparison of a metric from the current period to the same period in the previous year. * **Volume**: The quantity of products sold. * **New launches**: Introduction of new products into the market. * **Downside risk**: A potential factor that could negatively impact performance. * **Specialty portfolio**: A collection of niche or specialized products requiring specific marketing or distribution strategies.