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Lupin ----------------------------------------------------------------------------- Maintain OUTPERFORM
Rifaximin: Salix deal positive in medium term, though near term impact low
● Salix and Lupin expanded the Rifaximin deal outside US to
worldwide rights (excluding India). The deal is positive in the
medium term, though the near term impact is low. In the near
term, Lupin would receive $10 mn upfront payment and would get
milestone payments as the product advances in the US market.
● Lupin and Salix would jointly develop the product and Rifaximin
tablets using Lupin’s bioadhesive technology; it should take at
least two years to launch. Lupin would supply the API and the
finished product and would receive low teen royalties on the sales.
● Rifaximin is an antibiotic used against infections of the intestine.
Rifaximin sales in the US more than doubled in 2010 to ~$250 mn
and CS analyst Michael Faerm forecasts the sales will ramp up to
$1.1 bn by CY16. Lupin’s technology increases the residence time
in the GI tract and helps in the once daily composition of Rifaximin.
● In 4Q11 results, we expect Lupin to show margin recovery
sequentially, as Suprax prescriptions increased 11% QoQ and
Indian sales grew 21% YoY in Jan-Feb 2011 (AIOCD). Antara
prescriptions were flat QoQ. Maintain OUTPERFORM.
Salix expands Rifaximin deal with Lupin outside US
Salix entered into an agreement with Lupin in September 2009 to use
Lupin’s bioadhesive drug delivery technology with Rifaximin in the US
market. Today, Salix expanded the agreement from just the US
market to worldwide rights (except India). The agreement covers both
product development and commercialisation and includes the
following terms:
● Salix to make $10 mn upfront payment to Lupin and regulatory
milestone payments in the US market.
● Lupin to get minimum quarterly payments for product development.
● Lupin to supply Rifaximin API and certain finished Rifaximin
products.
● Lupin to get low teen royalties for sales of products covered by
Lupin patents or jointly held patents
Mid term positive deal though near term impact is low
The currently launched Rifaximin tablets of 200 mg and 550 mg do not
include Lupin’s bioadhesive technology. Lupin and Salix would jointly
develop the product and hence Rifaximin tablets using Lupin’s
technology would not be available for at least two years. Therefore,
the API supply upside and royalty from sales are still some years
away.
In the near term, Lupin would receive $10 mn upfront payment and
would get milestone payments as the product advances in the US
market. Therefore, it is still early to build in upside from Rifaximin,
though the opportunity is attractive in the medium term.
CS positive on Rifaximin outlook
Rifaximin (brand Xifaxan) is an antibiotic used against infections of the
intestine – it does not get absorbed in the blood, and so has reduced
side effects, targeting only bacteria that infect intestines. Rifaximin
sales in the US more than doubled in 2010 to ~$250 mn and CS
analyst Michael Faerm forecasts the sales can ramp up to $1.1 bn by
CY16. Rifaximin is currently approved as 200 mg tablets for travellers'
diarrhoea (TD) caused by E. Coli and 550 mg for Hepatic
Encephalopathy. It is also being tested for IBS (Irritable Bowel
Syndrome: a large $2 bn market) where it is in phase III trials.
As rifaximin is locally acting, it should remain in the gastrointestinal
tract (GI, i.e. the food canal) for a sufficient period of time – for a
patient with diarrhoea, this is difficult. The drug therefore requires
frequent dosing. Lupin’s bioadhesive technology controls the release
and/or increases the residence time in the GI tract by sticking to the
intestine walls, thereby helping in the once-daily composition of
Xifaxan.
4Q11: Margin should improve QoQ; Antara yet to pick up
Suprax prescriptions increased 11% QoQ, while Antara prescriptions
were flattish. Margin of the branded business will likely pick up. Margin
of US generics could be under pressure due to the entry of Par
Pharma in Lotrel in January 2011 (Lupin’s market share only
marginally increased QoQ). AIOCD data suggests that Indian sales
grew 21% YoY in Jan-Feb 2011 versus the expectation of 18% for
4Q11.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lupin ----------------------------------------------------------------------------- Maintain OUTPERFORM
Rifaximin: Salix deal positive in medium term, though near term impact low
● Salix and Lupin expanded the Rifaximin deal outside US to
worldwide rights (excluding India). The deal is positive in the
medium term, though the near term impact is low. In the near
term, Lupin would receive $10 mn upfront payment and would get
milestone payments as the product advances in the US market.
● Lupin and Salix would jointly develop the product and Rifaximin
tablets using Lupin’s bioadhesive technology; it should take at
least two years to launch. Lupin would supply the API and the
finished product and would receive low teen royalties on the sales.
● Rifaximin is an antibiotic used against infections of the intestine.
Rifaximin sales in the US more than doubled in 2010 to ~$250 mn
and CS analyst Michael Faerm forecasts the sales will ramp up to
$1.1 bn by CY16. Lupin’s technology increases the residence time
in the GI tract and helps in the once daily composition of Rifaximin.
● In 4Q11 results, we expect Lupin to show margin recovery
sequentially, as Suprax prescriptions increased 11% QoQ and
Indian sales grew 21% YoY in Jan-Feb 2011 (AIOCD). Antara
prescriptions were flat QoQ. Maintain OUTPERFORM.
Salix expands Rifaximin deal with Lupin outside US
Salix entered into an agreement with Lupin in September 2009 to use
Lupin’s bioadhesive drug delivery technology with Rifaximin in the US
market. Today, Salix expanded the agreement from just the US
market to worldwide rights (except India). The agreement covers both
product development and commercialisation and includes the
following terms:
● Salix to make $10 mn upfront payment to Lupin and regulatory
milestone payments in the US market.
● Lupin to get minimum quarterly payments for product development.
● Lupin to supply Rifaximin API and certain finished Rifaximin
products.
● Lupin to get low teen royalties for sales of products covered by
Lupin patents or jointly held patents
Mid term positive deal though near term impact is low
The currently launched Rifaximin tablets of 200 mg and 550 mg do not
include Lupin’s bioadhesive technology. Lupin and Salix would jointly
develop the product and hence Rifaximin tablets using Lupin’s
technology would not be available for at least two years. Therefore,
the API supply upside and royalty from sales are still some years
away.
In the near term, Lupin would receive $10 mn upfront payment and
would get milestone payments as the product advances in the US
market. Therefore, it is still early to build in upside from Rifaximin,
though the opportunity is attractive in the medium term.
CS positive on Rifaximin outlook
Rifaximin (brand Xifaxan) is an antibiotic used against infections of the
intestine – it does not get absorbed in the blood, and so has reduced
side effects, targeting only bacteria that infect intestines. Rifaximin
sales in the US more than doubled in 2010 to ~$250 mn and CS
analyst Michael Faerm forecasts the sales can ramp up to $1.1 bn by
CY16. Rifaximin is currently approved as 200 mg tablets for travellers'
diarrhoea (TD) caused by E. Coli and 550 mg for Hepatic
Encephalopathy. It is also being tested for IBS (Irritable Bowel
Syndrome: a large $2 bn market) where it is in phase III trials.
As rifaximin is locally acting, it should remain in the gastrointestinal
tract (GI, i.e. the food canal) for a sufficient period of time – for a
patient with diarrhoea, this is difficult. The drug therefore requires
frequent dosing. Lupin’s bioadhesive technology controls the release
and/or increases the residence time in the GI tract by sticking to the
intestine walls, thereby helping in the once-daily composition of
Xifaxan.
4Q11: Margin should improve QoQ; Antara yet to pick up
Suprax prescriptions increased 11% QoQ, while Antara prescriptions
were flattish. Margin of the branded business will likely pick up. Margin
of US generics could be under pressure due to the entry of Par
Pharma in Lotrel in January 2011 (Lupin’s market share only
marginally increased QoQ). AIOCD data suggests that Indian sales
grew 21% YoY in Jan-Feb 2011 versus the expectation of 18% for
4Q11.
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