 "Lupin Pharmaceuticals: Strong show fails to impress")
Lupin Pharmaceuticals’ strong set of numbers for the quarter ended June 2016 failed to impress the Street. One clear reason is the disappointment on margins and second, the net profit beat was led by non-operational items.
Revenues, at Rs 4,314 crore, grew 40 per cent over a year, led primarily by the US business but came slightly lower than the Bloomberg consensus estimate of Rs 4,432 crore. Strong revenue growth was anticipated by the Street, looking at the launch of anti-diabetic generic of Glumetza on exclusivity basis in the US in February. The market size of Glumetza is estimated at $450 million per annum. Operationally, though its launch did push up margins, increasing employee costs (up 42 per cent over a year) ensured profitability came below expectations. Employee costs increased due to the Gavis acquisition in the US, and field force expansions in India and Brazil to fuel growth. Thus, operating profit at Rs 1,308 crore, despite growing 58.6 per cent over a year, was also lower than the Bloomberg estimate of Rs 1,351 crore.
North America (over half to sales) grew 82 per cent, but domestic sales (a fifth of revenue) curtailed top line, as it grew only 5.2 per cent. This also suggests Lupin will have to clock higher growth in the remaining quarters to achieve its 15-16 per cent growth target for FY17. Japan, its third largest market (a 10th of sales), saw good growth of 11 per cent in constant currency terms.
However, in absence of any positive surprises and given the strong run-up (up 18 per cent in two months), Lupin’s stock fell five per cent to close at Rs 1,607.60 on Tuesday.
Complete clearance from the US Food and Drug Administration for its Goa plant remains a key growth trigger. Though clear timeline for its clearance is not known, Vinita Gupta, chief executive of Lupin, is looking at complete resolution in next six months.
Gavis is driving growth of its branded portfolio in the US and company expects to triple Gavis’ revenues by end of FY18. The acquisition in Japan of 21 products of Shionogi at attractive valuations should also drive growth in this geography from Q4 of FY17 onwards. Notably, Gupta says domestic growth traction is already visible as restructuring of field force and divisions and launches should help achieve the targeted growth.
Revenues, at Rs 4,314 crore, grew 40 per cent over a year, led primarily by the US business but came slightly lower than the Bloomberg consensus estimate of Rs 4,432 crore. Strong revenue growth was anticipated by the Street, looking at the launch of anti-diabetic generic of Glumetza on exclusivity basis in the US in February. The market size of Glumetza is estimated at $450 million per annum. Operationally, though its launch did push up margins, increasing employee costs (up 42 per cent over a year) ensured profitability came below expectations. Employee costs increased due to the Gavis acquisition in the US, and field force expansions in India and Brazil to fuel growth. Thus, operating profit at Rs 1,308 crore, despite growing 58.6 per cent over a year, was also lower than the Bloomberg estimate of Rs 1,351 crore.
North America (over half to sales) grew 82 per cent, but domestic sales (a fifth of revenue) curtailed top line, as it grew only 5.2 per cent. This also suggests Lupin will have to clock higher growth in the remaining quarters to achieve its 15-16 per cent growth target for FY17. Japan, its third largest market (a 10th of sales), saw good growth of 11 per cent in constant currency terms.
However, in absence of any positive surprises and given the strong run-up (up 18 per cent in two months), Lupin’s stock fell five per cent to close at Rs 1,607.60 on Tuesday.
Complete clearance from the US Food and Drug Administration for its Goa plant remains a key growth trigger. Though clear timeline for its clearance is not known, Vinita Gupta, chief executive of Lupin, is looking at complete resolution in next six months.
Gavis is driving growth of its branded portfolio in the US and company expects to triple Gavis’ revenues by end of FY18. The acquisition in Japan of 21 products of Shionogi at attractive valuations should also drive growth in this geography from Q4 of FY17 onwards. Notably, Gupta says domestic growth traction is already visible as restructuring of field force and divisions and launches should help achieve the targeted growth.