Event Participants
Executives
6 Richard Ascroft, Abhishek Sharma, Aalok D. Shanghvi, Kirti Ganorkar, Jayashree Satagopan, Dilip Shanghvi
Analysts
12 Abdulkader Puranwala, Amey Chalke, Bino Pathiparampil, Damayanti Kerai, Foram Parekh, Kunal Dhamesha, Neha Manpuria, Saion Mukherjee, Shashank Krishnakumar, Shyam Srinivasan, Surya Narayan Patra, Vishal Manchanda
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Sales | INR 1,51,836 million | +10.1% YoY; broad-based growth across India and innovative medicines |
| Gross Margin | 80.5% | Higher YoY on better product mix from branded generics and innovative medicines |
| EBITDA | INR 44,177 million | +2.7% YoY; adjusted for Q1 FY26 lenalidomide benefit, EBITDA margin higher YoY |
| EBITDA Margin | 28.9% | Slightly lower YoY primarily due to lenalidomide base effect |
| Net Profit (Reported) | INR 28,948 million | Includes INR 1,617 million exceptional charge for Organon acquisition costs |
| Net Profit (Adjusted) | INR 30,894 million | Excludes exceptional items |
| EPS | INR 12.10 per share | On reported PAT |
| Forex Gain | INR 1,220 million | Lower than Q1 FY26; positive translation impact on revenue |
| Effective Tax Rate | 27.8% | Up from 24.3% YoY; India tax benefit exhausting; expected to remain in similar range until Organon close |
| R&D Spend | INR 8,264 million | 5.4% of sales; 30% towards Innovative R&D, balance on generics and India products |
| Net Cash | $3.4 billion | Strong consolidated balance sheet |
Geographic & Segment Commentary
Global Innovative Medicines: Sales grew 12.8% YoY to $351 million, accounting for 21.9% of total sales. Growth driven by U.S. and ex-U.S. markets across Ilumya, Odomzo, and Cequa. Updated UNLOXCYT data at ASCO 2026 showed durable benefit with >1 in 4 patients achieving complete tumor response.
India Formulations: Sales grew 16% YoY to INR 54,749 million, representing 36.1% of consolidated sales. Company ranked #1 in IPM with 8.5% market share (Pharmarack MAT June 2026, up from 8.2%). 30.4% Pharmarack growth driven by volume expansion and new launches; volume growth of 5.4% vs IPM's 2%. #1 by prescription volumes across 12 doctor categories; launched 5 new products in the quarter. Became #2 generic semaglutide injectable player in India with unique auto-injector device.
U.S.: Sales declined 9.7% YoY to $427 million, 26.6% of consolidated sales. Innovative portfolio grew, offset by lenalidomide erosion and additional competition in certain generic products. QoQ decline due to generic decline and Levulan seasonality. Launched 5 generic products. LEQSELVI surpassed 1,000 prescribers in June with strongest month since launch; UNLOXCYT showing month-over-month growth as more cancer centers add it to formularies.
Emerging Markets: Sales grew 4.2% YoY to $311 million, 19.4% of consolidated revenue. Branded generics continued to grow; Innovative Medicines key growth driver with Ilumya performing well in Romania and Brazil. Slower growth attributed to geopolitical issues and difficult macroeconomic conditions in certain countries.
Rest of World: Sales of $218 million, marginally lower YoY, approximately 13.6% of consolidated revenue. Received approvals for generic semaglutide injection in Brazil and South Africa; launched in South Africa, Brazil launch expected shortly through partner.
Company-Specific & Strategic Commentary
Organon Acquisition: Shareholder approval received; regulatory filing process completed in various markets with approvals received in certain countries. Acquisition expected to close in Q4 FY27 with integration management office working on day-one preparedness. Exceptional charges will continue in subsequent quarters, back-ended with substantial accrual at closing.
Semaglutide Expansion: Company vertically integrated with in-house API and formulation; tied up with component suppliers for devices. Launched in India (March 2026), South Africa, and preparing Brazil launch. Well-prepared supply chain to commercialize opportunity across markets.
U.S. Innovative Launches: LEQSELVI achieving payer access for majority of covered lives (added important plan in the quarter); UNLOXCYT focused on cancer center and IDN formularies, progressing rapidly due to differentiated safety profile (no grade 4/5 immune-mediated AEs typical of PD-1/PD-L1s). Both products expanding prescriber base and monthly growth.
R&D Investments: Innovative R&D 30% of total R&D spend. Philogen resubmitted Nidlegy for marketing authorization in Europe; updated data to be published in major journal. LEQSELVI potential expansion into other autoimmune indications being evaluated with U.S. investigator-initiated trials underway; MM-II out-licensing strategy driven by absence of commercial coverage of orthopedic/rheumatology prescribers in U.S.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth FY27 | High single-digit guided | Management maintaining guidance despite Q1's 10.1% growth; mindful of exchange-related impacts across P&L line items |
| Effective Tax Rate | ~27.8% range until Organon close | India tax benefit exhausting; varying jurisdictional rates; optimization efforts ongoing |
| Organon Acquisition Close | Q4 FY27 | Regulatory approvals filed in all markets; integration management office working on day-one preparedness; additional exceptional charges expected, back-ended |
| EBITDA Margins | Higher YoY ex-lenalidomide | Product mix improvement from branded generics and innovative medicines sustaining margin profile |
| Selling Expenses | Sustained investment through launch cycle | LEQSELVI/UNLOXCYT launch costs are ongoing commercialization investment, not one-time; forex translation contributing to higher costs |
Risks & Constraints
| Risk | Context |
|---|---|
| Lenalidomide Erosion | Largest driver of U.S. generic revenue decline (-9.7% YoY); expected to continue impacting YoY comparisons though base effect diminishes |
| Organon Acquisition Execution | Regulatory approvals pending in certain markets; exceptional charges not fully crystallized with substantial accrual at closing; management not positioned to guide full estimate |
| Exchange Rate Volatility | Forex translated higher costs and impacted revenue; CFO flagged exchange-related impacts across all P&L line items for FY27 guidance |
| Emerging Markets Macro | Slower growth (4.2% vs high-teens in prior quarters) attributed to geopolitical tensions and difficult macroeconomic conditions in certain countries |
| Rest of World Flatness | Middle East war impacting performance; run-rate uncertain until geopolitical situation stabilizes |
| Increased Competition in U.S. Generics | Additional competition in certain products contributing to generic decline; new product launches (5 in quarter) expected to partially offset |
| Tax Rate Normalization | ETR increased from 24.3% to 27.8% as India tax benefits exhaust; structural step-up until Organon close with optimization efforts in progress |
Q&A Highlights
Specialty Growth Deceleration
- Question: Why the deceleration in specialty/innovative medicines growth in Q1? (Amey Chalke, JM Financial)
- Answer: Management expects healthy growth to continue for innovative business in U.S., driven by UNLOXCYT and Ilumya. Rick Ascroft noted Levulan seasonality impacting Q1 and expected similar next quarter. No product-wise revenue disclosure provided. (Kirti Ganorkar, Richard Ascroft)
Gross Margin Sustainability
- Question: What is driving gross margin expansion despite Revlimid loss, and are levels sustainable? (Damayanti Kerai, HSBC)
- Answer: Growth driven by product mix with branded generics and Innovative Medicines contributing higher share of overall revenues, reflecting favorably on gross margins. (Jayashree Satagopan)
LEQSELVI/UNLOXCYT Access
- Question: How is formulary access progressing for the two launches? (Kunal Dhamesha, Macquarie)
- Answer: LEQSELVI now has majority of covered lives; added important plan in the quarter. UNLOXCYT is Medicare Part B administered in healthcare settings, focused on cancer center and IDN formularies with rapid progress due to differentiated MOA (no grade 4/5 immune-mediated AEs). Access decisions influenced by clinicians at institutions. (Richard Ascroft)
U.S. Generic Business Trajectory
- Question: When will U.S. generic business turn the corner given sharp step-down? (Neha Manpuria, BofA Securities)
- Answer: Largest part of YoY decline is lenalidomide; QoQ decline from competition on a few products. Five new product launches in quarter will contribute to growth. No specific guidance on U.S. generic recovery timeline. (Richard Ascroft, Dilip Shanghvi)
Emerging Markets Slowdown
- Question: Why did Emerging Markets growth moderate to 4% from high-teens earlier? (Neha Manpuria, BofA Securities)
- Answer: Combination of geopolitical issues and difficult macroeconomic conditions in certain countries. Branded generics continue to grow with some pricing pressure but not the driving force. (Aalok Shanghvi)
U.S. Generic Strategy & R&D Leverage
- Question: Can U.S. generic business return to generating cash flows? (Shashank Krishnakumar, Emkay Global)
- Answer: Products registered for U.S. are also sold in other geographies (e.g., semaglutide approvals globally are from U.S. development). Company building a basket of products to grow globally rather than viewing U.S. generics in isolation. (Dilip Shanghvi)
India Growth Decomposition
- Question: What is driving India growth and semaglutide dynamics? (Saion Mukherjee, Nomura; Shyam Srinivasan, Goldman Sachs)
- Answer: Growth driven by all business units with field force expansion in tier 2/3 cities. 50% of growth from volume and new products (40% volume, 20% new product), indicating prescription generation ahead of IPM. Semaglutide doing well on prescription and value sides; auto-injector format unique and user-friendly. (Kirti Ganorkar)
LEQSELVI Additional Indications
- Question: Plans for expanding LEQSELVI into other indications like vitiligo? (Shashank Krishnakumar, Emkay Global)
- Answer: LEQSELVI down-regulates important cytokines involved in multiple autoimmune conditions; will prioritize areas where product can differentiate and face less competition on market entry. Investigator-initiated trials in U.S. informing decisions. (Dilip Shanghvi, Richard Ascroft)
Tax Rate Trajectory
- Question: Is the 27.8% ETR the new consolidated range? (Shyam Srinivasan, Goldman Sachs)
- Answer: Yes, consolidated ETR expected in 27.8% range until Organon transaction completed. Varying jurisdictional tax rates and exhausting India tax benefit are drivers. Endeavor to optimize ETR ongoing. (Jayashree Satagopan)
Other Expenses & Employee Costs
- Question: Why have other expenses and personnel costs risen ahead of revenue, and how should they trend? (Kunal Dhamesha, Macquarie; Surya Narayan Patra, PhillipCapital)
- Answer: Three drivers: (1) annual increments in Q1, (2) additional field force for two new U.S. launches and Innovative Medicines promotion in other markets, (3) forex translation impact. Launch costs are sustained commercialization investment, not one-time. R&D spend lower in Q1 will normalize in coming quarters. (Jayashree Satagopan, Richard Ascroft)
MM-II Out-Licensing Rationale
- Question: Why consider partnership for MM-II despite successful specialty portfolio? (Surya Narayan Patra, PhillipCapital)
- Answer: MM-II targets orthopedic pain prescribed by orthopedicians/rheumatologists; Sun has no U.S. commercial presence covering these doctors, making out-licensing to a partner with presence in the therapeutic area the right strategy. (Dilip Shanghvi)
Rest of World Sustainability
- Question: Is the $218 million ROW run-rate the new base given Middle East conflict? (Foram Parekh, B&K Capital)
- Answer: ROW flat in dollar terms; no forward guidance for specific geographies, referencing overall company revenue growth guidance instead. (Aalok Shanghvi)
Key Takeaway
Sun Pharma reported Q1 FY27 sales of INR 1,51,836 million (+10.1% YoY) with EBITDA margins of 28.9% (higher YoY ex-lenalidomide) driven by product mix improvements from branded generics and innovative medicines. India Formulations grew 16% to become #2 generic semaglutide player with the only auto-injector format, while Global Innovative Medicines grew 12.8% led by Ilumya, Odomzo, and Cequa; U.S. declined 9.7% YoY on lenalidomide erosion and generic competition. The company is executing a dual growth strategy: expanding specialty launches (LEQSELVI surpassed 1,000 prescribers with majority payer coverage; UNLOXCYT gaining rapid formulary access at cancer centers) while scaling semaglutide across India, South Africa, and Brazil with vertically integrated supply. Organon acquisition remains on track for Q4 FY27 close, with back-ended exceptional charges and ETR of ~27.8% expected through the period. Management maintained high single-digit revenue growth guidance, flagging forex impacts and continued launch investments as key considerations; watch points include U.S. generic stabilization, Emerging Markets macro conditions, and Organon integration execution.