Morgan Stanley: Sun Pharmaceuticals share price presents opportunity

Updated: Dec 25 2013, 01:09am hrs
SPARC (Sun Pharma Advanced Research), with a $-600-million market cap de-merged from Sun, got a complete FDA response letter on its second drug in the NDDS pipeline, Venlafaxine 300mg, says Morgan Stanley.

The USFDA did not approve the drug. In May, FDA did not approve SPARCs first product, levetiracetam XR 1000/1500 mg. (SPARC plans to submit additional studies for the drug).

In its response, the FDA requested additional studies related to efficacy and safety. According to the company, these studies may relate to head-to-head comparisons with the innovators product.

In view of the additional cost and time required to perform these studies and obtain product approval, SPARC is evaluating Venlas commercial viability.We had estimated $30 million in sales potential from Venla in F2015 (with some upside share with Sun) and believed that this was a rather small opportunity for Sun/SPARC.

In all, SPARC is developing more than a dozen new drug delivery system (NDDS) drugs.

Sun is likely to share some value in SPARCs pipeline through manufacturing and marketing partnerships. We expect this to be a mid- to longer-term growth driver for Sun. We reiterate our overweight rating on Sun and view the current stock weakness as a good opportunity to buy the stock.

By Morgan Stanley