Sun Pharma Launches Dry Eye Drug In U.S. After Nine-Month Delay

After delaying for three quarters, India's largest pharmaceutical company has finally launched a key dry eye drug from its specialty portfolio in the U.S.

Sun Pharmaceutical Industries Ltd. has commercialised Cequa, which is indicated to increase tear production in patients with keratoconjunctivitis sicca (dry eye), an inflammatory disease that afflicts more than 16 million people in the U.S., according to an exchange filing.

Cequa was approved by the U.S. Food and Drug Administration in 2018 and its launch was scheduled in the fourth quarter of the financial year ended March 2019. But certain technical issues prompted the company to defer its launch to the April-June period of the financial year ending March 2020 and then again to the quarter ended September. The product has been finally launched in October.

The dry eye market in the U.S., including over the counter and prescription-based drugs, is estimated to be $2.9 billion, Morgan Stanley said in a report citing IMS data. It expects Cequa, which will face competition from Restasis and Xiidra, to generate $40-60 million in revenue over the next couple of months. Cequa is an improved version of Restasis, which according to Citi is a $1.8-billion drug. But there are already 10 generic filers for Restasis, indicating Sun Pharma has limited time to ramp up before the other copycat versions come in.

Piyush Nahar, senior vice-president at Jefferies, however, said Cequa, given its better efficacy and faster onset, could gain a 10-15 percent market share at better pricing versus the generics. The brokerage expects Cequa to generate peak sales worth $70 million in two years.

Most Indian generic drugmakers, including Sun Pharma, have been looking at specialty drugs as competition took away their pricing power in the U.S.—one of the biggest contributors to sales—shrinking margin. The specialty segment, according to Sun Pharma's post-earnings conference call, generated $94 million in sales in the quarter ended June. The company is focusing on specialty drugs for treating ailments ranging from dry eye and psoriasis to cancers for reducing its dependence on low-margin copycat versions of drugs. Sun Pharma has seven products under its specialty portfolio.

Here's what other analysts have to say about Cequa…

BofAML

Girish Bakhru, pharma analyst at BofAML, said Cequa is the third product in ophthalmic (pertaining to eye) portfolio after Xelpros and BromSite under Sun Ophthalmics Inc. in the U.S. Despite the delay, Cequa is estimated to generate $45 million sales for Sun Pharma in FY21, he said in a note.

Citi

Cequa is an important product for Sun Pharma and could be one of the key drivers of profitability of the company's specialty business, according to Prashant Nair, pharma analyst at Citi. This drug, he said, becomes important given the slower-than-expected ramp up in Ilumya so far. Nair expects Cequa to generate revenue worth $30 million, $60 million and $90 million over FY20-22. The revenue could be higher if entry of Restasis' generics get delayed a lot further, he said in a note.

CLSA

Cequa has the potential to generate $100-125 million peak sales despite competition from the Restasis generics, Alok Dalal, investment analyst (healthcare) at CLSA, said. With all the specialty products now launched in the U.S., ramp-up is key and a strong execution can drive a rerating, he said in a note.

Shares of Sun Pharma gained as much as 1.36 percent during the day compared with the NSE Nifty Pharma Index's 0.22 percent rise.