Lupin - Form 483 to Indore, but ANDA Approval Follows; Event Update :: Edelweiss

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Lupin’s (LPC) Indore facility has received Form 483 (6 observations) from the USFDA post the inspection in January 2015. Also, the company announced approval for generic Lumigan (ophthalmic) from the same facility and stated that it has received 1 ANDA approval / 2 site-transfer approvals post the Form 483 issuance. Contrary to popular belief that Form 483s can withhold approvals, LPC’s fresh approvals should allay Street’s concerns. However, it remains unclear if further USFDA action (warning letter, import alert) will follow given that the observations remain unresolved. We will closely watch the developments around this facility as it is important for the company’s long-term growth strategy as it houses several niche ANDA filings.

Indore facility: Important for future growth

The Indore facility specialises in products requiring “dedicated manufacturing setups.” Currently, LPC’s sales from the facility are at USD50-60mn (mostly oral contraceptives, ophthalmics). We believe, several niche segments - oral contraceptives, opthlamics, oncology, dermatology, etc.- would have been filed from here and will form a decent chunk of future earnings. Any further USFDA action could impact earnings significantly, but quantifying the same at this juncture will be difficult.

Form 483s common; provide no sense of further FDA action

Over 60% of all FDA inspections have resulted in Form 483s for Indian companies. However, LPC’s record is slightly better at 52%. We reiterate our belief that further FDA action (warning letter / import alert) cannot be concluded by merely evaluating Form 483 observations. The company’s interaction (not public) with the FDA determines the final action and not the observations solely. Though Forms 483s do not halt business activity or withhold ANDA approvals, they do tend to sway Street sentiment.

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