 "Lupin Pharma")
Lupin’s performance for the December 2015 quarter lifted Street sentiments despite the company’s net profit declining 11.9 per cent year-on-year (y-o-y) to to Rs 530 crore. The US, which contributes more than 40 per cent to Lupin’s overall revenues, positively surprised. US sales, which had declined in the first two quarters of FY16, jumped 22 per cent sequentially to Rs 1,405 crore. Though flat compared to Rs 1,404 crore in the year-ago period, the Street was expecting a decline on a y-o-y basis. This helped Lupin post better-than-expected net profits.
The robust show got a push from price increases taken in diabetes medicine Fortamet (generics) leading to product sales growing 2.2 times, according to IMS data. Lupin’s anti-bacterial products sales also supported. The earlier decline in sales had been largely contributed by a lack of big product approvals on a high base. While the earlier big product launches such as anti-depressant Duloxetine, Niacin (lipid control) and arthritis drug Celecoxib started facing competition and price erosion, the new boost from fresh big launches was not coming either.
Even though Lupin has received about 22 approvals (one of the highest in Indian generic companies), the major product approval for the launch of Glumetza (generics drug for diabetes treatment) on exclusivity came only a few days ago. This approval is likely to drive growth in the March quarter. Nilesh Gupta, managing director, Lupin, said the acquisition of Gavis was also likely to be completed soon. This will start adding to Lupin’s US growth. The company is targeting 20-30 product launches in FY17 compared to 18-20 products in FY16. Lupin’s margins also surged to 28.1 per cent in the third quarter from 21.1 per cent in the year-ago period. Thus, with the US growth reviving the Street’s euphoria is understandable.
The Lupin scrip, which has been on a downtrend since October 2015, gained nine per cent to close at Rs 1,801 a share on Friday.
Domestic sales (a fourth of revenues) grew 17 per cent y-o-y. Although marginally lower on sequential basis due to seasonal factors, it should pick up as Lupin is expanding its field force substantially and the new product launch run-rate will continue.
The firm is working on a niche range of products and targets segments such as dermatology, respiratory, injectables and biosimilars. The substantially higher research and development expenditure versus peers at 11.7 per cent of revenue reflects Lupin’s intentions.
Following the results, expect the Street to upgrade earnings estimates and target prices.
