Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lupin Ltd.
In-line 4Q; Buy Now for 2012
Product Flow; OW
Quick Comment: By and large, Lupin reported an
in-line 4Q. Sales rose 17.6% yoy (up 3% qoq) driven by
developed and developing market dosage form exports.
Operating margin compressed 200bp to 20% (30bp qoq
expansion) on higher R&D spending (11 ANDA filings)
and start-up expenses at new Indore SEZ. This led to a
3% yoy rise in net profit to Rs2.27bn (Rs2.17bn
excluding US$6mn Salix payment, MSe – Rs2.12bn).
Future Outlook: Chairman DB Gupta noted that Lupin
is at an inflection point and is well placed to maintain
growth momentum. It is targeting US$3bn sales by
F2014 (US$1.3bn in F2011), which we believe could be
aspirational. Lupin continues to believe that it can
expand OPM 50-75bp p.a. for the foreseeable future.
Tax rate will likely rise meaningfully in F2012 on the
expiration of EOU benefits for Mandideep and Goa.
R&D will remain at 8.5% of sales, one of the highest in
rates in the group. F2012 capex will be the same as in
F2011 at US$100mn.
How to think about the stock: We believe that the US
product flow for the next 4-6 months may not be exciting
as levofloxacin, Effexor XR, Fortamet (sole excl), and
Suprax tabs expansion are either too competitive or
small. But lucrative launches including ziprasidone,
combivir and OCs in the US should pick up in 2012. As
such, we believe that the stock may be flat for the next
few months, which should be a buying opportunity on
2012-13 growth momentum. The valuation is
reasonable at 18x F2012 EPSe – a 5% discount to
group valuations.
Other Highlights – Branded business: Allernaze (no
timeline given by the company) launch appears distant.
However, Suprax life cycle management appears
impressive with PDUFA for drop form scheduled for
September 2011. Bio-similar pipeline includes six
candidates, two of which are likely to enter clinicals soon.
Longer-term US pipeline is shaping up nicely – 148
ANDAs filed, 48 approved, of the remaining 100, 60 are
Para IVs and 15 are FTFs (4 are sole exclusivity).
Analyst meet highlights
• Outlook: Management expects:
o 50-75bps margin expansion p.a. in the coming years.
o To file over 30 ANDAs in FY12.
o Capex of approximately US$100mn for FY12.
o To launch of over 10 products in the US generic market in
FY12.
• US branded business: US branded business accounted for
30% of the overall US business (of Rs20.2bn for FY11).
Lupin has a total field force of 160 representatives, of which
70 are focused in pediatric market (Suprax suspension) and
the remaining 90 on Suprax tablet and Antara.
o Suprax: Suprax clocked gross revenues of US$85mn in
FY11. For FY11, prescriptions for suspension form were
up 10.6% while that for tablet form were up 60%.
o Antara: Since the acquisition of Antara, for the first time it
grew both in prescription and sales terms in F4Q11.
• US Generics:
o US generics business accounted for about 70% of the
overall US business (of Rs20.2bn for FY11).
o Lupin targets to launch over 10 products in FY12 including
Fortamet ER, levofloxacin, a couple of products from the
oral contraceptives portfolio, and Geodon (shared
exclusivity).
o The company filed 21 ANDAs in FY11 (including 11 in
F4Q11)n taking total filings to 148 ANDAs, of which 48
have been approved so far.
o The pipeline for the US market includes 60 Para IV
opportunities, of which 15 are FTF opportunities (four are
sole FTF).
o According to management, it is on schedule to file for
ophthalmology products in US.
o Oral contraceptives: According to management, it will
be the fourth entrant and expects an additional 2-3 players
to enter after Lupin. Lupin is fully integrated (API and
formulations from Indore SEZ) for oral contraceptives.
o Asthma strategy: Management initially targets to focus
on MDI for the US and EU market.
o During FY11, Lupin settled the patent litigations for
Lunesta, Memantine, Loestrin and Femcon.
• Europe performance: Europe segment clocked revenues
of Rs1.8bn for FY11, up 30% driven by France. It launched
Clarithromycin XL in France in FY11. Management is
currently awaiting registration approval for the German
market, after which it targets to participate in the tender
business. Lupin made 33 product filings in the European
market in FY11.
Exhibit 1
Lupin: Lupin: Regulatory fillings Status
US Europe
Filed 148 91
Approved 48 44
Source: Company data, Morgan Stanley Research
• Domestic formulations market: Lupin posted revenue of
Rs15.5bn for FY11. About 70% of the domestic business is
the chronic segment (up 30% in FY11) and 30% is acute
segment (mainly anti-infectives and anti-TB). Management
expects the domestic segment to grow at about 20% in the
near term. It launched 41 products in FY11 and expects the
launch momentum to continue in FY12. Lupin has total field
force of approximately 4,200 medical representatives.
• Japan: Japan segment clocked revenue of Rs6.2bn, up
16.3%, despite a 15% price cut. The company launched five
products in FY11 and targets to launch seven products in
FY12.
• Other markets:
o South Africa: Lupin clocked revenue of Rs1.8bn, up 38%,
in the South African market. It’s subsidiary is now the
sixth-largest generic company in South Africa.
o CIS: Lupin launched three products in Russia in FY11.
• Biologics: Lupin has invested over Rs1bn on the biologics
segment so far. It has a pipeline of six products, two of which
are expected to enter clinical trials shortly.
• Patent license agreement with Abbott: Lupin entered a
patent license agreement with Abbott covering certain
fenofibrate patents including Antara. According to
management, it made a one-time payment (insignificant) to
Abbott toward this agreement.
• USFDA has inspected and approved its CRO facility.
• Acquisition strategy: Management highlighted that it
continues to evaluate acquisition targets and future
acquisitions will be bigger then the acquisitions done so far.
• R&D activity: R&D expenditure for FY11 stood at Rs4.83bn,
about 8.5% of net sales, of which about 25% was spent on
drug discovery. Lupin has a total pool of over 1,000
scientists, 210 of which are involved in drug discovery.
Management expects R&D expenditure to be in the range of
8.5% of sales in the near term.
• Working capital cycle is down to 83 days in FY11 from 91
days in FY10.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lupin Ltd.
In-line 4Q; Buy Now for 2012
Product Flow; OW
Quick Comment: By and large, Lupin reported an
in-line 4Q. Sales rose 17.6% yoy (up 3% qoq) driven by
developed and developing market dosage form exports.
Operating margin compressed 200bp to 20% (30bp qoq
expansion) on higher R&D spending (11 ANDA filings)
and start-up expenses at new Indore SEZ. This led to a
3% yoy rise in net profit to Rs2.27bn (Rs2.17bn
excluding US$6mn Salix payment, MSe – Rs2.12bn).
Future Outlook: Chairman DB Gupta noted that Lupin
is at an inflection point and is well placed to maintain
growth momentum. It is targeting US$3bn sales by
F2014 (US$1.3bn in F2011), which we believe could be
aspirational. Lupin continues to believe that it can
expand OPM 50-75bp p.a. for the foreseeable future.
Tax rate will likely rise meaningfully in F2012 on the
expiration of EOU benefits for Mandideep and Goa.
R&D will remain at 8.5% of sales, one of the highest in
rates in the group. F2012 capex will be the same as in
F2011 at US$100mn.
How to think about the stock: We believe that the US
product flow for the next 4-6 months may not be exciting
as levofloxacin, Effexor XR, Fortamet (sole excl), and
Suprax tabs expansion are either too competitive or
small. But lucrative launches including ziprasidone,
combivir and OCs in the US should pick up in 2012. As
such, we believe that the stock may be flat for the next
few months, which should be a buying opportunity on
2012-13 growth momentum. The valuation is
reasonable at 18x F2012 EPSe – a 5% discount to
group valuations.
Other Highlights – Branded business: Allernaze (no
timeline given by the company) launch appears distant.
However, Suprax life cycle management appears
impressive with PDUFA for drop form scheduled for
September 2011. Bio-similar pipeline includes six
candidates, two of which are likely to enter clinicals soon.
Longer-term US pipeline is shaping up nicely – 148
ANDAs filed, 48 approved, of the remaining 100, 60 are
Para IVs and 15 are FTFs (4 are sole exclusivity).
Analyst meet highlights
• Outlook: Management expects:
o 50-75bps margin expansion p.a. in the coming years.
o To file over 30 ANDAs in FY12.
o Capex of approximately US$100mn for FY12.
o To launch of over 10 products in the US generic market in
FY12.
• US branded business: US branded business accounted for
30% of the overall US business (of Rs20.2bn for FY11).
Lupin has a total field force of 160 representatives, of which
70 are focused in pediatric market (Suprax suspension) and
the remaining 90 on Suprax tablet and Antara.
o Suprax: Suprax clocked gross revenues of US$85mn in
FY11. For FY11, prescriptions for suspension form were
up 10.6% while that for tablet form were up 60%.
o Antara: Since the acquisition of Antara, for the first time it
grew both in prescription and sales terms in F4Q11.
• US Generics:
o US generics business accounted for about 70% of the
overall US business (of Rs20.2bn for FY11).
o Lupin targets to launch over 10 products in FY12 including
Fortamet ER, levofloxacin, a couple of products from the
oral contraceptives portfolio, and Geodon (shared
exclusivity).
o The company filed 21 ANDAs in FY11 (including 11 in
F4Q11)n taking total filings to 148 ANDAs, of which 48
have been approved so far.
o The pipeline for the US market includes 60 Para IV
opportunities, of which 15 are FTF opportunities (four are
sole FTF).
o According to management, it is on schedule to file for
ophthalmology products in US.
o Oral contraceptives: According to management, it will
be the fourth entrant and expects an additional 2-3 players
to enter after Lupin. Lupin is fully integrated (API and
formulations from Indore SEZ) for oral contraceptives.
o Asthma strategy: Management initially targets to focus
on MDI for the US and EU market.
o During FY11, Lupin settled the patent litigations for
Lunesta, Memantine, Loestrin and Femcon.
• Europe performance: Europe segment clocked revenues
of Rs1.8bn for FY11, up 30% driven by France. It launched
Clarithromycin XL in France in FY11. Management is
currently awaiting registration approval for the German
market, after which it targets to participate in the tender
business. Lupin made 33 product filings in the European
market in FY11.
Exhibit 1
Lupin: Lupin: Regulatory fillings Status
US Europe
Filed 148 91
Approved 48 44
Source: Company data, Morgan Stanley Research
• Domestic formulations market: Lupin posted revenue of
Rs15.5bn for FY11. About 70% of the domestic business is
the chronic segment (up 30% in FY11) and 30% is acute
segment (mainly anti-infectives and anti-TB). Management
expects the domestic segment to grow at about 20% in the
near term. It launched 41 products in FY11 and expects the
launch momentum to continue in FY12. Lupin has total field
force of approximately 4,200 medical representatives.
• Japan: Japan segment clocked revenue of Rs6.2bn, up
16.3%, despite a 15% price cut. The company launched five
products in FY11 and targets to launch seven products in
FY12.
• Other markets:
o South Africa: Lupin clocked revenue of Rs1.8bn, up 38%,
in the South African market. It’s subsidiary is now the
sixth-largest generic company in South Africa.
o CIS: Lupin launched three products in Russia in FY11.
• Biologics: Lupin has invested over Rs1bn on the biologics
segment so far. It has a pipeline of six products, two of which
are expected to enter clinical trials shortly.
• Patent license agreement with Abbott: Lupin entered a
patent license agreement with Abbott covering certain
fenofibrate patents including Antara. According to
management, it made a one-time payment (insignificant) to
Abbott toward this agreement.
• USFDA has inspected and approved its CRO facility.
• Acquisition strategy: Management highlighted that it
continues to evaluate acquisition targets and future
acquisitions will be bigger then the acquisitions done so far.
• R&D activity: R&D expenditure for FY11 stood at Rs4.83bn,
about 8.5% of net sales, of which about 25% was spent on
drug discovery. Lupin has a total pool of over 1,000
scientists, 210 of which are involved in drug discovery.
Management expects R&D expenditure to be in the range of
8.5% of sales in the near term.
• Working capital cycle is down to 83 days in FY11 from 91
days in FY10.
No comments:
Post a Comment