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RESULTS FIRST LOOK
Lupin reported 2QFY2 revenues 2% ahead of our estimates. Adjusted for a forex loss of INR 80mn, EBITDA was broadly in-line with our estimates. Net profit was subdued due to higher-than-expected tax rate which was a result of the Medicis milestone being booked in India. US and India remain key growth drivers. US growth is expected to be driven by OC launches and other low-competition products. Management guided to growth in domestic formulations at >20% y-y. At 18x FY13 the stock trades at a discount to front-line Indian generic companies. Maintain BUY.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RESULTS FIRST LOOK
Lupin reported 2QFY2 revenues 2% ahead of our estimates. Adjusted for a forex loss of INR 80mn, EBITDA was broadly in-line with our estimates. Net profit was subdued due to higher-than-expected tax rate which was a result of the Medicis milestone being booked in India. US and India remain key growth drivers. US growth is expected to be driven by OC launches and other low-competition products. Management guided to growth in domestic formulations at >20% y-y. At 18x FY13 the stock trades at a discount to front-line Indian generic companies. Maintain BUY.
Revenues ahead of estimates; US & India growth strong; target of US$3bn revs by FY15 reiterated
Lupin reported 24% y-y growth in net sales for 2QFY12. The growth was led by US and India business which grew 15% and 22% y-y, respectively. Europe and Japan sales registered growth of 25% and 14% y-y. API business was flat y-y and came in 8% below our expectations. The management reiterated the aspiration of being a US$3bn top line company by FY15.
· US: Growth in US was led by the new product launches which contributed 75% of the total growth. Volume and price variations in older products contributed the remaining 25%.
The generics business grew 14% y-y. As per the management, the generics business grew 30% y-y excluding the pricing decline in generic Lotrel.
Lupin launched generic Fortamet (US$80mn) at risk in Sep 2011 with 180 day exclusivity. Management said that 2 months of inventory was sold during 2QFY12. Following the initial launch, Lupin was injuncted on 12th Oct 2011 from selling the product and a court hearing is scheduled in early Dec 2011 to decide on the injunction.
Lupin also launched generic Femcon FE (US$60mn) during the quarter and has garnered 16% market share as per the management. Further, the company expects to launch generic Nor QD (US$50mn) and LoSeasonique (US$30mn) during 3QFY12 for which it already has final approval. The oral contraceptive franchise is expected to reach peak sales in FY14. Lupin has a cost advantage compared with other players in the space, as it is the only company that is vertically integrated on the OC portfolio.
The company said that they expect to launch 5-6 products in the US over 2HFY12. Lupin has a pipeline of 99 ANDAs including 19 FTFs pending approval which include niche product filings like OCs and ophthalmology products.
The branded business grew 19% y-y primarily led by the strong performance of Suprax franchise. The recently launched Suprax tablets registered strong revenue growth of 52% y-y, while the suspension formulation grew 6% in volume terms. Revenues from Antara declined 3% y-y during the quarter. The management conceded that the fenofibrate market has been shrinking since the ACCORD (Action to Control Cardiovascular Risk in Diabetes) trial results were announced and this has had an adverse impact on Antara. As per the results of the ACCORD trial, simvastatin when taken in combination with fenofibrate does not significantly reduce the risk of heart strokes in Type 2 diabetes patients when compared with similar patients taking simvastatin with a placebo. Lastly, Aerochamber also registered a significant decline in revenues.
Going forward, the management does not expect generic competition in Suprax for the next 12 months. Lupin received a response letter from the FDA regarding Suprax drops in Sep 2011. The management expects to file the response and hear back from the FDA by Jun 2012. Regarding Allernaze, the management suggested a launch in FY13. On inorganic growth strategy, the company is looking at opportunities in the pediatric, allergy and ENT (Ear, Nose and Throat) spaces.
· India: Revenues from domestic sales grew 22% y-y for the quarter. Lupin booked sales of INR 180mn from the Eli Lilly (LLY US) deal for two months during the quarter. The insulin franchise is expected to generate a quarterly run rate of INR 350-400mn as per the management. The management expects to continue to grow revenues at >20% y-y.
· Europe, Japan and API: Europe continued to grow strongly albeit on a lower base. Japan revenues grew 14% y-y and the management expects to maintain a 12% growth. The API business disappointed, as it came in flat y-y.
Margins disappoint; Revenue cost mismatch at the Indore SEZ, inflation in input costs, sales promotion expenditure put pressure on EBITDA margins
Revenues ahead of estimates; US & India growth strong; target of US$3bn revs by FY15 reiterated
Lupin reported 24% y-y growth in net sales for 2QFY12. The growth was led by US and India business which grew 15% and 22% y-y, respectively. Europe and Japan sales registered growth of 25% and 14% y-y. API business was flat y-y and came in 8% below our expectations. The management reiterated the aspiration of being a US$3bn top line company by FY15.
· US: Growth in US was led by the new product launches which contributed 75% of the total growth. Volume and price variations in older products contributed the remaining 25%.
The generics business grew 14% y-y. As per the management, the generics business grew 30% y-y excluding the pricing decline in generic Lotrel.
Lupin launched generic Fortamet (US$80mn) at risk in Sep 2011 with 180 day exclusivity. Management said that 2 months of inventory was sold during 2QFY12. Following the initial launch, Lupin was injuncted on 12th Oct 2011 from selling the product and a court hearing is scheduled in early Dec 2011 to decide on the injunction.
Lupin also launched generic Femcon FE (US$60mn) during the quarter and has garnered 16% market share as per the management. Further, the company expects to launch generic Nor QD (US$50mn) and LoSeasonique (US$30mn) during 3QFY12 for which it already has final approval. The oral contraceptive franchise is expected to reach peak sales in FY14. Lupin has a cost advantage compared with other players in the space, as it is the only company that is vertically integrated on the OC portfolio.
The company said that they expect to launch 5-6 products in the US over 2HFY12. Lupin has a pipeline of 99 ANDAs including 19 FTFs pending approval which include niche product filings like OCs and ophthalmology products.
The branded business grew 19% y-y primarily led by the strong performance of Suprax franchise. The recently launched Suprax tablets registered strong revenue growth of 52% y-y, while the suspension formulation grew 6% in volume terms. Revenues from Antara declined 3% y-y during the quarter. The management conceded that the fenofibrate market has been shrinking since the ACCORD (Action to Control Cardiovascular Risk in Diabetes) trial results were announced and this has had an adverse impact on Antara. As per the results of the ACCORD trial, simvastatin when taken in combination with fenofibrate does not significantly reduce the risk of heart strokes in Type 2 diabetes patients when compared with similar patients taking simvastatin with a placebo. Lastly, Aerochamber also registered a significant decline in revenues.
Going forward, the management does not expect generic competition in Suprax for the next 12 months. Lupin received a response letter from the FDA regarding Suprax drops in Sep 2011. The management expects to file the response and hear back from the FDA by Jun 2012. Regarding Allernaze, the management suggested a launch in FY13. On inorganic growth strategy, the company is looking at opportunities in the pediatric, allergy and ENT (Ear, Nose and Throat) spaces.
· India: Revenues from domestic sales grew 22% y-y for the quarter. Lupin booked sales of INR 180mn from the Eli Lilly (LLY US) deal for two months during the quarter. The insulin franchise is expected to generate a quarterly run rate of INR 350-400mn as per the management. The management expects to continue to grow revenues at >20% y-y.
· Europe, Japan and API: Europe continued to grow strongly albeit on a lower base. Japan revenues grew 14% y-y and the management expects to maintain a 12% growth. The API business disappointed, as it came in flat y-y.
Margins disappoint; Revenue cost mismatch at the Indore SEZ, inflation in input costs, sales promotion expenditure put pressure on EBITDA margins
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