Strong US portfolio boost for Lupin

Market share gains in the US led to higher operating or underlying profit

Lupin's performance in December quarter was ahead of Street estimates. Buoyed by growth across geographies, sales grew 32 per cent to Rs 4,405 crore over a year ago, ahead of Bloomberg consensus estimate of Rs 4,293 crore. Operating or underlying profit was even more impressive at Rs 1,215.8 crore, up 43.6 per cent year over year, and way ahead of Rs 1,061.4-crore estimate. The operating margin at 27.6 per cent grew 230 basis points year over year. Despite higher taxes, net profit saw 20.7 per cent growth to Rs 619 crore. 

Profit growth was largely a function of its performance in the US. The better show was despite expected competition for the company's diabetic portfolio. Lupin managed to increase its market share in the generics version of anti-diabetic drug Glumetza, which opened up to more competition after the expiry of the six-month exclusivity period. Also, with Goa facility now cleared by US Food and Drug Administration, approvals have gathered pace. During the quarter, the firm received 11 approvals and launched four products in the US, helping the country account for half of overall sales as sales in that geography grew 57.6 per cent year over year.  

The Street, however, will remain watchful of US growth in coming quarters, given the high base created by launch of Glumetza generics on exclusivity in the year-ago quarter. With pace of approvals for new launches high and large product approvals expected too, analysts expect growth momentum to continue. The acquired Gavis facility has been ramped up and new launches are expected from there as well. Among the existing products, Lupin is expanding its base in the uterine product Methergine from Gavis's Somerset facility. Vinita Gupta, chief executive of Lupin, says they plan to add more than 24 products in the US over the next 12 months.

In the meanwhile, the product pipeline continues to expand, given the filings for its inhalation products. The next year should see launches in oral solids, dermatology products, controlled substances, other dosage forms, as well as Lupin's nasal spray in the US market.

The India market revenue growth, despite demonetization, came in at 12 per cent. This may improve in the March quarter as cash comes back into the system. Despite the single-digit growth in the first quarter of FY17, the full-year growth is expected to come in at 12 per cent. The management has set a 15 per cent growth target for the coming year. 

Japan remains another important geography and in constant-currency terms the geography grew 5.2 per cent year on year and 8.1 per cent sequentially. The quarter included some contributions from acquired Shionogi portfolio; full benefits will arise in coming quarters. 

Revenue growth in Europe, West Asia (Middle East), Africa, Latin America, and rest of the world ranged from 16.8-32.8 per cent. Analysts expect sales growth momentum across geographies to continue, with performance in the US market standing out. Sarabjit Kour Nangra at Angel Broking maintains buy rating on stock.