Regulatory clearances, US growth near term triggers for Lupin

India business has seen steady uptick growth over the last few quarters

Lupin’s December quarter results were a tad below expectations. Its two biggest markets, India and the US accounting for 70 per cent of the revenues, registered a growth of 5 per cent each over the year ago quarter. In a weak market, the stock was down 4 per cent. 

While the India revenues were broadly in line with expectations, the US market growth was lower than estimates. Revenue momentum in the market was impacted by the pandemic and weakness in seasonal portfolio (flu medications). Growth going ahead, however, is expected to improve driven by sharp market share gains in inhaler albuterol, specialty portfolio and biosimilar launches in the US and Europe. The US abbreviated new drug application (ANDA) pipeline includes 152 pending approval with 16 of them being exclusive first to file drugs.

From its lows last year, the India business continues to see a sequential recovery for the fourth consecutive quarter, with the company outperforming the domestic market with a 8.8 per cent growth in branded formulation sales. Growth was led by the chronic portfolio with anti-diabetic, cardiac and central nervous system therapies posting double digit uptick. 

In addition to the growth outlook, the street would also look at the margin movement in the coming quarters. Margins in the quarter were up on a sequential and year ago basis to 20.4 per cent. The company highlighted that R&D spends are being optimised and would be capped at 9 per cent of sales. 

The key trigger for the stock would be clearance of its facilities by the US drug regulator (US FDA). The company had received 13 observations for its US-based Somerset facility which has 40 pending ANDAs recently. With the US FDA resuming its physical inspections, there could be more clarity on the issue as compared to delays earlier. 

While the stock is up 13 per cent since the start of December and has outperformed its pharma peers, the consensus target price of Rs 1,014, indicates hardly any upside from the current levels. Investors should await growth traction in the US market as well as regulatory clearances for multiple sites which are under US FDA scanner.