Lupin’s surprising rise in Quetiapine:: Elara

We notice Lupin’s surprising rise in prescription (Rx) share in August
2012 in Quetiapine (Seroquel) after staying moderate at 8-10% market
share. The drug went off-patent in March 2012 and Lupin received
approval on day-one of generic competition along with other para-IV
challengers. We believe that Lupin’s growth to 35,208 Rx in August
2012 from average 8,063 Rx in April-July 2012 need an insight in the
cause, while other competitors remains at similar number of Rx in
August 2012. Though management explains the rise is normal
business progression, we believe the reason could be aggressive price
cut/special incentive to attract distributors’ in Seroquel. The growth
could also be a result of falling supply in market from leading
competitors. At innovator price, the Alzheimer drug’s market value
was USD4.5bn in US before being generic.

�� -->


Analyzing new Rx data along with total Rx share in Quetiapine, we
found Lupin’s gain in market share coincides with Teva’s loss in market
share in Seroquel. While the total Rx share may not describe apparent
reason for Lupin’s rise in Rx, data on new Rx/week and incremental
gain per week clearly indicate Lupin’s gain is mainly helped by Teva’s
significant loss (from market share of 47% in July 2012 to 30% in Aug
2012) in new Rx/week and marginal expansion in Rx/week market for
generic Seroquel.
Conclusion: Revenue expansion at the cost of margin
While the expansion of Rx for Lupin may lead to be market leader at
current growth rate, we expect this could be achieved at the cost of
operating margin of its US generics. Lupin’s in-house API production of
Seroquel however may subside the loss to a certain extent. Overall,
Seroquel event may reflect in near term financials for Lupin in FY13,
while overall impact would may not be significant. We however keep a
watch on Lupin’s marketing policy if they extend this experience to all
other new approvals of blockbuster drugs in last 12 months. With rich
valuation at current market price, we downgrade our
recommendation to Reduce. Maintain our target price at INR643.