Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lupin (LPC IN)
OW: Margin pressure visible but stable outlook
US sales to grow strongly in 2H with impending launches of
ziprasidone, tramadol ER and generic Femcon Fe
Margin outlook to improve on the back of favourable product
mix and improved cost efficiency at new SEZ facility
Maintain Overweight rating and INR530 target price
Lupin reported 1QFY12 net profit of INR2.1bn (up 7% y-o-y), c10% lower than our
estimate (c6% lower than consensus), largely impacted by lower US sales and marginally
higher costs. Net sales at INR15.7bn were c3% lower than our estimate, with US falling
short by 12%. The rest of the regions were in line including domestic which grew at a
healthy 17% y-o-y. EBITDA stood at INR3bn, with margin at 18.8% 200bps lower than
our estimate. Net profit was partly assisted by lower interest and tax rate.
India strong, US growth to accelerate in 2HFY12: Sales in the domestic market were
up 17% and are expected to remain strong on the back of an increasing contribution from
focus therapies. US sales growth at 6% y-o-y was below expectation, essentially due to
price erosion in generic Lotrel. Recent launches in the US include generic Lotrel (high
strength) and levofloxacin (where Lupin has c35% market share). Lupin expects to launch
c8-10 products in the US. The company filed four ANDAs in 1QFY12. Cumulative filings
are now at 152 of which c100 are pending approval. We expect material launches in 2H to
drive US sales. We expect US sales to do significantly better on the back of launches
including generic Femcon Fe, Ultram ER (tramadol ER) and Geodon (ziprasidone). The
company is still evaluating options on generic Fortamet which may see a delayed launch.
Branded business forms c30% of overall US sales and is seeing strong growth in Suprax
suspension (up 8% in volume) and tablets (up c30% in volume). Antara’s share of sales
continues to grow although the market overall is in decline. The branded sales force is
maintained at 160 (70 in paeds, 90 in primary care).
Margins decline on the back of higher costs: Site transfers from Goa to Indore facility,
rising staff costs on the back of staff additions and higher input costs, have put pressure on
margins. We expect margins to improve gradually in tandem with higher efficiencies from
the new facility. R&D costs in 1QFY12 were at INR1bn (at 7% to sales).
Reiterate OW and TP at INR530: We maintain our current estimates and introduce
2014 estimates. We continue to value Lupin at 22x FY13e EPS of INR24. Key risks to our
view include delay in generic approvals, generic entry in Suprax and launch of generic
TriCor impacting growth in Antara.
AstraZeneca sues Lupin on Vimovo
Lupin was sued by AstraZeneca on 25 July 25, 2011 on naproxen and esomeprazole combination drug
Vimovo, which is largely indicated for the treatment of osteoarthritic pain. Dr. Reddy's is another known
filer for generic Vimovo (though it has not been sued on early expiring patents). Overall sales for Vimovo
are currently less than USD50m, given the product was recently approved in the US (approval date is
April 2010). However, there are multiple patents that cover Vimovo with the earliest patent expiry in
August 2015. Lupin has been sued by Astrazeneca on ‘504, ‘872, ‘085, ‘070, ‘466 and ‘907 patents.
Vimovo has NC (new combination) exclusivity until 30 April 2013.
Conference call highlights
1 Branded sales in the US grew 9% y-o-y mainly driven by Suprax suspension and tablet growth.
Suprax suspension, which constitutes a higher proportion of the Suprax franchise, grew 8%
y-o-y while the tablet form grew 38% y-o-y.
2 Lupin expects to launch 8-10 products in the US during FY12 including about four oral
contraceptives (OCs). The company has launched two products of these so far and the rest are
expected in 3Q and 4Q of FY12. The company expects the contribution from OCs to be material only
in FY13. TriCor is expected to go generic by November 2012, and Lupin expects to launch after
Teva’s exclusivity possibly in June 2012.
3 AllerNaze production target remains at Q4FY12 though launch timelines are not rigid.
4 Domestic field force is c4,000 people. The company is growing strongly in key therapeutic segments
including cardiovascular (22%), respiratory (27%), gynaecology (65%), diabetes (30%). The antiinfectives and TB are two therapies that are not growing.
5 Lupin acquired the Goanna brand in Australia (sales USD3m) which gives access to pharmacies as it
is stocked by c83% of total pharmacies in Australia. Australia region sales in FY11 were cUSD7m.
6 Japan sales growth in constant currency terms was c15%. The company has launched six products in
the region recently.
7 Tax rate likely to remain at 14-15% for FY12.
Valuation and risks
We maintain our current estimates and introduce 2014 estimates. We continue to value Lupin at 22x
FY13e EPS of INR24.
Under our research model, for stocks without a volatility indicator, the Neutral band is 5 percentage
points above and below the hurdle rate for Indian stocks of 11.0%. This translates into a Neutral band of
6-16% above the current share price. Our unchanged target price of INR530 provides a potential return of
18%, which is above the Neutral band and therefore, we maintain our Overweight rating.
Key risks to our view include delay in generic approvals, generic entry in Suprax and launch of generic
TriCor impacting growth in Antara.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lupin (LPC IN)
OW: Margin pressure visible but stable outlook
US sales to grow strongly in 2H with impending launches of
ziprasidone, tramadol ER and generic Femcon Fe
Margin outlook to improve on the back of favourable product
mix and improved cost efficiency at new SEZ facility
Maintain Overweight rating and INR530 target price
Lupin reported 1QFY12 net profit of INR2.1bn (up 7% y-o-y), c10% lower than our
estimate (c6% lower than consensus), largely impacted by lower US sales and marginally
higher costs. Net sales at INR15.7bn were c3% lower than our estimate, with US falling
short by 12%. The rest of the regions were in line including domestic which grew at a
healthy 17% y-o-y. EBITDA stood at INR3bn, with margin at 18.8% 200bps lower than
our estimate. Net profit was partly assisted by lower interest and tax rate.
India strong, US growth to accelerate in 2HFY12: Sales in the domestic market were
up 17% and are expected to remain strong on the back of an increasing contribution from
focus therapies. US sales growth at 6% y-o-y was below expectation, essentially due to
price erosion in generic Lotrel. Recent launches in the US include generic Lotrel (high
strength) and levofloxacin (where Lupin has c35% market share). Lupin expects to launch
c8-10 products in the US. The company filed four ANDAs in 1QFY12. Cumulative filings
are now at 152 of which c100 are pending approval. We expect material launches in 2H to
drive US sales. We expect US sales to do significantly better on the back of launches
including generic Femcon Fe, Ultram ER (tramadol ER) and Geodon (ziprasidone). The
company is still evaluating options on generic Fortamet which may see a delayed launch.
Branded business forms c30% of overall US sales and is seeing strong growth in Suprax
suspension (up 8% in volume) and tablets (up c30% in volume). Antara’s share of sales
continues to grow although the market overall is in decline. The branded sales force is
maintained at 160 (70 in paeds, 90 in primary care).
Margins decline on the back of higher costs: Site transfers from Goa to Indore facility,
rising staff costs on the back of staff additions and higher input costs, have put pressure on
margins. We expect margins to improve gradually in tandem with higher efficiencies from
the new facility. R&D costs in 1QFY12 were at INR1bn (at 7% to sales).
Reiterate OW and TP at INR530: We maintain our current estimates and introduce
2014 estimates. We continue to value Lupin at 22x FY13e EPS of INR24. Key risks to our
view include delay in generic approvals, generic entry in Suprax and launch of generic
TriCor impacting growth in Antara.
AstraZeneca sues Lupin on Vimovo
Lupin was sued by AstraZeneca on 25 July 25, 2011 on naproxen and esomeprazole combination drug
Vimovo, which is largely indicated for the treatment of osteoarthritic pain. Dr. Reddy's is another known
filer for generic Vimovo (though it has not been sued on early expiring patents). Overall sales for Vimovo
are currently less than USD50m, given the product was recently approved in the US (approval date is
April 2010). However, there are multiple patents that cover Vimovo with the earliest patent expiry in
August 2015. Lupin has been sued by Astrazeneca on ‘504, ‘872, ‘085, ‘070, ‘466 and ‘907 patents.
Vimovo has NC (new combination) exclusivity until 30 April 2013.
Conference call highlights
1 Branded sales in the US grew 9% y-o-y mainly driven by Suprax suspension and tablet growth.
Suprax suspension, which constitutes a higher proportion of the Suprax franchise, grew 8%
y-o-y while the tablet form grew 38% y-o-y.
2 Lupin expects to launch 8-10 products in the US during FY12 including about four oral
contraceptives (OCs). The company has launched two products of these so far and the rest are
expected in 3Q and 4Q of FY12. The company expects the contribution from OCs to be material only
in FY13. TriCor is expected to go generic by November 2012, and Lupin expects to launch after
Teva’s exclusivity possibly in June 2012.
3 AllerNaze production target remains at Q4FY12 though launch timelines are not rigid.
4 Domestic field force is c4,000 people. The company is growing strongly in key therapeutic segments
including cardiovascular (22%), respiratory (27%), gynaecology (65%), diabetes (30%). The antiinfectives and TB are two therapies that are not growing.
5 Lupin acquired the Goanna brand in Australia (sales USD3m) which gives access to pharmacies as it
is stocked by c83% of total pharmacies in Australia. Australia region sales in FY11 were cUSD7m.
6 Japan sales growth in constant currency terms was c15%. The company has launched six products in
the region recently.
7 Tax rate likely to remain at 14-15% for FY12.
Valuation and risks
We maintain our current estimates and introduce 2014 estimates. We continue to value Lupin at 22x
FY13e EPS of INR24.
Under our research model, for stocks without a volatility indicator, the Neutral band is 5 percentage
points above and below the hurdle rate for Indian stocks of 11.0%. This translates into a Neutral band of
6-16% above the current share price. Our unchanged target price of INR530 provides a potential return of
18%, which is above the Neutral band and therefore, we maintain our Overweight rating.
Key risks to our view include delay in generic approvals, generic entry in Suprax and launch of generic
TriCor impacting growth in Antara.
No comments:
Post a Comment