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Lupin Ltd.
Good 2Q, Building Pipeline
for Longer Term
Quick Comment – Strong F2Q11 results: Sales were
up 26% to Rs14.1 bln, mainly driven advanced market
formulations (up 40%, 47% revenues share) and
domestic formulations (up 16.6%, 30% revenue share).
Operating profit margins expanded 240 bps largely due
to better product mix and cost control, leading to 34.1%
rise in net profits to Rs2.15 bln (MSe Rs2.06 bln).
Quality of domestic sales is now high given that 70% is
derived from lifestyle therapies and only 16-17% from
stagnant TB portfolio.
Building a base for strong future: Lupin plans to enter
one niche (and hence, lucrative) therapy area every year
over the next 3-5 years, with oral contraceptives (23
ANDA fillings so far), ophthalmology (fillings in FY11),
dermatology (fillings in FY12) and asthma (in FY13).
Further Lupin has set up a new R&D centre in
Aurangabad. Importantly, company targets to grow its
top-line at 25% and improve margins 75-100 bps per
annum in the mid term.
Key product updates: Oral Contraceptives – Lupin
expects approval for its first set of OC products (4-5)
from Sept-Oct 11 onwards and expects 12-15 product
launches by Sept 2012. Allernaze – Due to
manufacturing issues, Allernaze launch is now delayed
(possibly for a long time, we believe). Suprax – Lupin
has received approval for it’s chewable form and has
filed a 505(b)(2) application for its drop formulation.
Antara – Over the last 2 months Lupin has seen an
encouraging trend in its market share driven by increase
in new Rx. Lotrel – Generic Lotrel continues to be a
lucrative market with six generic players now (including
recently approved Watson).
Tracking points – Lupin targets to launch 4 products in
Japan in Nov 10 and 8-10 non-OC products in the US in
FY12. It targets to deepen its US pipeline by filing 35
ANDAs in F11. Presently, it has 54 para IV fillings of
which 15 are FTFs. OCs will likely get additional
competition from players including Mylan and Glenmark.
Conference call highlights:-
Outlook: Without giving any specific guidance, Management
highlighted that it targets to grow top-line by 25% pa and
EBIDTA margin expansion by 75-100 bps pa in the medium
term. It expects the tax rate to be in the range of 13-13.5% and
file 35 ANDAs in FY11.
Key products / opportunities update:
• Suprax: Lupin has received approval for its
chewable tablet form. Further, Lupin has filed an NDA
(505(b)(2) route) for Suprax drop formulation.
• Allernaze: Due to manufacturing issues (validation
issues), the launch is now delayed.
• Antara: Post the addition of field force (to now 160),
Lupin has seen an encouraging trend in total
prescriptions driven by an increase in new
prescriptions and stabilizing existing prescriptions.
• Generic Lotrel: According to the management,
Lotrel continues to be a lucrative opportunity; with 5
competitors including Dr Reddy’s and recently
approved Watson.
• Oral contraceptives (OC): Management expects
approval cycle for its first set of 4-5 products to begin
from Sept-Oct 2011 onwards and expects 12-15
product launches by Sept-2012. So far, it has filed 23
ANDAs. According to management, total oral
contraceptive market is ~US$4.5 bln. Further it
expects 2-3 additional players to enter the market.
US Generics: For F2Q11, the US generics segment grew
53% yoy, mainly driven by a strong performance in the existing
portfolio and new product launches (Lotrel, imipramine). It
targets to launch 8-10 non-OC products in FY12. Further the
company plans to file 35 ANDAs in FY11. Key therapy focus
from an ANDA filling perspective over the next three years
includes ophthalmology (in FY11), dermatology (in FY12) and
asthma (in FY13). Lupin now has a pipeline of 54 para IV of
which 15 are FTFs (first to file).
Domestic formulations: Domestic formulations segment
clocked revenues of Rs4.2 bln, up 16.6% yoy. Key therapy
presence for Lupin includes cardiology, diabetology, neuro,
anti-infective, gastro intestinal, anti-tuberculosis, gynecology,
and has recently entered into oncology and ophthalmology. Its
lifestyle segment (including cardiology and diabetology)
contributes ~70% to the revenues, while anti-TB segment
contributes 16-17%. The company launched 12 products in
F2Q11, taking total launches to 23 in F1H11.
Japan: Japan business clocked revenues of Rs1.6 bln, up
22% yoy in Rs terms (up 17% in local currency terms). The
company plans to launch 4 products in Nov. 2010. It expects
the Japan business to outperform local market growth in the
ensuing quarters. Lupin’s Goa facility is approved by PMDA,
the Japanese regulatory authority.
R&D activity: R&D expenditure for F2Q11 was Rs1.16 bln,
8% of revenues. Management expects R&D expenditure to be
in the range of 8% of revenues in the ensuing years. Lupin has
set up research capabilities for dermatology & asthma and has
set up a new R&D centre at Aurangabad.
Capex: The company incurred capex of Rs918 mln for F2Q11.
It targets capex in the range of Rs4-5 bln pa over the next 3
years.
Rebate accounting: To align with IFRS, the company has
now started adjusting rebates from revenues. Excluding this
adjustment, the US branded business grew 24% yoy (vs 10%
growth reported).
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