Sun Pharma delivered consolidated revenue of ₹15,183 crore in Q1FY27, representing 10% year-on-year growth, outpacing the company's high single-digit growth guidance for FY27. However, consolidated EBITDA margin contracted 133 basis points year-on-year to 28.1%, mainly due to lower foreign-exchange gains, higher spending on new product launches and acquisition-related costs. Despite these margin pressures, gross margin expanded 95 basis points to 80.5%, led by a richer product mix with higher contribution from innovative medicines and branded generics. The company's adjusted PAT came in 11% higher than expected, led by higher other income, while management maintained its optimistic outlook based on the company's strong growth trajectory.
India formulations emerged as the fastest-growing segment, contributing 36% of Q1 consolidated revenue with sales rising 16% year-on-year to ₹5,475 crore. The growth was led by cardiovascular (CVD), central nervous system (CNS) and gastro-ortho therapies, with around 40% of the growth coming from higher volumes and 20% from new launches, indicating healthy prescription gains. Sun Pharma introduced five products in India during the quarter and strengthened its GLP-1 market position, becoming the second-largest player in generic injectable semaglutide and the only Indian company offering a semaglutide auto-injector. The innovative medicines portfolio also supported growth in emerging markets, where revenue rose 15.4% year-on-year to ₹2,945 crore, accounting for 19.4% of consolidated sales.
The US formulations business remained the weak spot, with revenue falling 9.7% year-on-year to $427 million, hurt by lower generic sales following continued erosion in Lenalidomide and increased competition in certain products. However, Leqselvi continues to gain traction, with prescriptions and the number of prescribing physicians increasing each month. Despite these mixed results, Motilal Oswal maintains its optimistic outlook based on the company's strong growth trajectory supported by expansion in innovative medicines through partnerships, launches and wider reach. The US generics segment decline was attributed to lower g-Revlimid contribution and increased competition across select base products.
Sun Pharma's innovative medicines portfolio continues to gain traction across the US and international markets, with the company expanding its specialty and innovative medicines portfolio significantly. The specialty portfolio is expected to deliver a 13% annual growth over FY26-FY28, aided by improving physician adoption and expanding market access. Revenue from innovative medicines increased 12.8% year-on-year to $351 million, accounting for 21.9% of total sales, with growth broad-based across the US and international markets, driven by Ilumya, Odomzo and Cequa. The innovative portfolio will likely remain a key growth engine, supported by products such as Ilumya, Odomzo and Cequa, along with the ramp-up of new launches.
The Organon acquisition is expected to close in Q4FY27, with management expecting only a modest initial contribution given the mature nature of the acquired portfolio. JM Financial expects the merger to enhance annual free-cash-flow generation to 2x by FY29, with the company's strategy likely to increasingly focus on inorganic growth as both businesses have limited organic growth drivers at their combined scale. Key milestones over the next 12-18 months include a USFDA decision on Ilumya for psoriatic arthritis in October 2026, topline phase-II data for GL0034 in Type-2 diabetes during the second half of 2027, progress on Fibromun, and regulatory filings for dermatology and oncology assets. Sun Pharma shares hit a fresh 52-week high of ₹2,046.90, suggesting investors are capturing the optimism, with the stock trading at 35.5x its FY27 estimated earnings.
