Sparc, Sun Pharma move up in lockstep on D-Street

Sun Pharma Advanced Research Co (Sparc), the drug discovery business owned by the promoter group of Sun Pharma, is fast emerging as another alternative to capture Sun’s growth prospects on the Street. The two stocks — Sun and Sparc — share a high correlation of 85% since 2013 and are increasingly moving in lockstep.

But investors should make no mistake — Sun and Sparc are two very different businesses with different risk profiles.

Sun runs a profitable lowrisk generic drugs business in India and outside with high institutional holding. In contrast, Sparc is a loss-making business investing in the highrisk area of drug R&D. Its stock has historically been more volatile than that of Sun. Sun’s stock has declined 10% in the past one year, adversely impacted by Ranbaxy’s integration and the USFDA clampdown on its Halol facility.

Meanwhile, Sparc has gained 73% during this period fuelled by low base and milestone developments in its R&D pipeline.

For those looking at investing in Sun at a time when it is trading at relatively lower valuations, they can also consider placing their bets on Sparc.