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Lupin (LPC)
Pharmaceuticals
Competition heating up in OCs. We view the OC segment with cautious optimism
due to (1) high market shares enjoyed by incumbents, (2) portfolio concentration with
small market size for many of the older non-combination OCs and (3) entry of Sandoz
in 4 big OCs and impending entry of Mylan with 22 products. We think Lupin’s OC
target of US$125 mn by FY2014E is far-fetched. We factor US$50/75 mn in
FY2013/14E. Street estimates, with FY2013E EPS higher than Rs27, are likely to be
factoring aggressive OC sales, an optimistic scenario in our view. Retain ADD; PT Rs530.
Competition heats up—two-player segment set to become a six-player one
What was a two-player generic segment in US comprising Teva and Watson will soon become a
six-player generic segment—(1) Glenmark was the first Indian company to enter this space in April
2010; however, analysis of quarterly sales shows little success till date, (2) Sandoz entered in early
2011 and is selling 4 OCs with a meaningful size including the biggest combination pills,
Yaz/Yasmin, while (3) Lupin got its first 2 approvals in September 2011, (4) Mylan, the 6th generic
player plans to launch 22 OCs from 2H2011E till 2014, (5) We are also aware of a Para IV filing for
Yaz (largest OC in US) by Sun. While Sun has confirmed it has more OC filings, it is not targeting
all products as it already foresees heavy competition and commoditization in some of the products.
Teva, Watson enjoy high market shares, Sandoz and Mylan are strong competitors
Competition is less than other oral generics, but these reasons make us cautious— (1) small size
of older OCs leading to portfolio concentration. As per Watson’s 10-K, its top 5 OCs account
for 50% of its revenues; it markets over 30 OCs, (2) high market shares enjoyed by Teva,
Watson. As per Watson’s 10-K, it enjoys 36% market share in OCs in US; Teva’s proprietary OCs
sales in US (excluding generics) are US$400 mn. Ortho Tri-Cyclen is first OC approval with sales
higher than US$100 mn for Glenmark versus earlier 3 approvals, which contained noncombination
pills (progestin only); hence size was small in the range of US$30-45 mn. Teva and
Watson enjoy 70% market share in Ortho Tri-Cyclen with sales of US$115 mn and US$45 mn, and
(3) price erosion is substantial as seen in Yaz. Teva, first firm to launch generic Yaz in 2010, led
25% erosion in its market size to US$578 mn for 12 months ending February 2011 from US$780
mn for 12 months ending December 2009.
Street may be factoring in aggressive OC sales
Street is likely to be factoring aggressive OC sales as (1) Lupin’s 26 OCs are likely to be approved
over 2.5 years, tracking Mylan timelines. Mylan has 22 filings to be launched from 2H2011E till
1H2014E, and (2) ramp-up in Lupin’s sales will not only depend on fast approvals but approvals of
combination OCs with meaningful size. We factor OC sales of US$75 mn in FY2014E (OC market
size of US$2.5 bn excluding Yaz/Yasmin, 75% price erosion and 12% market share).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lupin (LPC)
Pharmaceuticals
Competition heating up in OCs. We view the OC segment with cautious optimism
due to (1) high market shares enjoyed by incumbents, (2) portfolio concentration with
small market size for many of the older non-combination OCs and (3) entry of Sandoz
in 4 big OCs and impending entry of Mylan with 22 products. We think Lupin’s OC
target of US$125 mn by FY2014E is far-fetched. We factor US$50/75 mn in
FY2013/14E. Street estimates, with FY2013E EPS higher than Rs27, are likely to be
factoring aggressive OC sales, an optimistic scenario in our view. Retain ADD; PT Rs530.
Competition heats up—two-player segment set to become a six-player one
What was a two-player generic segment in US comprising Teva and Watson will soon become a
six-player generic segment—(1) Glenmark was the first Indian company to enter this space in April
2010; however, analysis of quarterly sales shows little success till date, (2) Sandoz entered in early
2011 and is selling 4 OCs with a meaningful size including the biggest combination pills,
Yaz/Yasmin, while (3) Lupin got its first 2 approvals in September 2011, (4) Mylan, the 6th generic
player plans to launch 22 OCs from 2H2011E till 2014, (5) We are also aware of a Para IV filing for
Yaz (largest OC in US) by Sun. While Sun has confirmed it has more OC filings, it is not targeting
all products as it already foresees heavy competition and commoditization in some of the products.
Teva, Watson enjoy high market shares, Sandoz and Mylan are strong competitors
Competition is less than other oral generics, but these reasons make us cautious— (1) small size
of older OCs leading to portfolio concentration. As per Watson’s 10-K, its top 5 OCs account
for 50% of its revenues; it markets over 30 OCs, (2) high market shares enjoyed by Teva,
Watson. As per Watson’s 10-K, it enjoys 36% market share in OCs in US; Teva’s proprietary OCs
sales in US (excluding generics) are US$400 mn. Ortho Tri-Cyclen is first OC approval with sales
higher than US$100 mn for Glenmark versus earlier 3 approvals, which contained noncombination
pills (progestin only); hence size was small in the range of US$30-45 mn. Teva and
Watson enjoy 70% market share in Ortho Tri-Cyclen with sales of US$115 mn and US$45 mn, and
(3) price erosion is substantial as seen in Yaz. Teva, first firm to launch generic Yaz in 2010, led
25% erosion in its market size to US$578 mn for 12 months ending February 2011 from US$780
mn for 12 months ending December 2009.
Street may be factoring in aggressive OC sales
Street is likely to be factoring aggressive OC sales as (1) Lupin’s 26 OCs are likely to be approved
over 2.5 years, tracking Mylan timelines. Mylan has 22 filings to be launched from 2H2011E till
1H2014E, and (2) ramp-up in Lupin’s sales will not only depend on fast approvals but approvals of
combination OCs with meaningful size. We factor OC sales of US$75 mn in FY2014E (OC market
size of US$2.5 bn excluding Yaz/Yasmin, 75% price erosion and 12% market share).
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