Hikmas raised guidance implies that doxy prices will remain high compared to February 2013, when prices shot up 500% due to drug shortage) for the balance of the year.
URL/Mutual (acquired by Sun in Dec12) is a beneficiary of doxycycline hyclate shortage since it has 19.9% market share. Based on Hikmas current market share and guidance, Sun could gross approximately $120 million in revenue with high margins (approximately 7% of FY14 estimated earnings per share).
We reiterate overweight. Suns business growth drivers are intact. High-quality domestic formulations, RoW and non-Taro US; and the new drivers are shaping up well. The company continues to build a pipeline of complex generics to ensure longer-term growth.
We have assumed a $100 million doxycycline contribution in our model for FY14, which has upward bias if the current pricing continues.