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Lupin Ltd
(LUPN.BO / LPC IN)
Multi-pronged growth
We like Lupin’s strong execution capabilities, demonstrated across its
important markets: ~80% of its formulations sales come from India, the US
and Japan, and it is a market leader in each.
■
Getting the emerging markets strategy right: Lupin’s forays into emerging
markets have been measured, but very successful (especially Japan): it first
spends time understanding nuances of the market, and then plunges in. With
a professional CEO for a long time now, professionalisation has helped. It
has managed acquisitions very well, and. Lupin is now looking to enter Latin
America, which it believes can be a good market for its OC portfolio.
■
Japan: Well positioned; improving margins: Gross margins in Japan are
now up to 42% (33% when Kyowa was acquired in October 2007): most of
this has come from raising asset productivity (capacity raised without much
capex), and efficient sourcing. API sourcing from India should start in a year
for three to four big products. Formulation supplies in two to three years. The
Goa facility has been approved by the Japanese regulator and a separate
line is being set up.
■
US: Strong business momentum; Good pipeline being built: With stellar
supply-chain execution Lupin (99.5% service levels) has had strong marketshare
gains in the US in most major products, sometimes even from industry
leaders like Teva and Sandoz. It is now the sixth-largest pharmaceutical
company in the US by volume, indicating the trust it enjoys of major
pharmacies and distributors. We are also encouraged by the hormones
opportunity (market size US$4.5 bn). With 26 filings completed for oral
contraceptives (its recent settlement with Warner Chilcott showed the quality
of its filings), Lupin is now focusing on the next therapy areas. It had been
working on ophthalmics for a while, and the next suite after ophthalmics is
expected to be inhalers: filings to start in two years.
■
Potential for further re-rating: Lupin’s management model allows it to
scale rapidly, growing in several businesses at the same time without losing
focus. We think it will be a good long term buy at these levels.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Lupin Ltd
(LUPN.BO / LPC IN)
Multi-pronged growth
We like Lupin’s strong execution capabilities, demonstrated across its
important markets: ~80% of its formulations sales come from India, the US
and Japan, and it is a market leader in each.
■
Getting the emerging markets strategy right: Lupin’s forays into emerging
markets have been measured, but very successful (especially Japan): it first
spends time understanding nuances of the market, and then plunges in. With
a professional CEO for a long time now, professionalisation has helped. It
has managed acquisitions very well, and. Lupin is now looking to enter Latin
America, which it believes can be a good market for its OC portfolio.
■
Japan: Well positioned; improving margins: Gross margins in Japan are
now up to 42% (33% when Kyowa was acquired in October 2007): most of
this has come from raising asset productivity (capacity raised without much
capex), and efficient sourcing. API sourcing from India should start in a year
for three to four big products. Formulation supplies in two to three years. The
Goa facility has been approved by the Japanese regulator and a separate
line is being set up.
■
US: Strong business momentum; Good pipeline being built: With stellar
supply-chain execution Lupin (99.5% service levels) has had strong marketshare
gains in the US in most major products, sometimes even from industry
leaders like Teva and Sandoz. It is now the sixth-largest pharmaceutical
company in the US by volume, indicating the trust it enjoys of major
pharmacies and distributors. We are also encouraged by the hormones
opportunity (market size US$4.5 bn). With 26 filings completed for oral
contraceptives (its recent settlement with Warner Chilcott showed the quality
of its filings), Lupin is now focusing on the next therapy areas. It had been
working on ophthalmics for a while, and the next suite after ophthalmics is
expected to be inhalers: filings to start in two years.
■
Potential for further re-rating: Lupin’s management model allows it to
scale rapidly, growing in several businesses at the same time without losing
focus. We think it will be a good long term buy at these levels.
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