Lupin

Albuterol contribution to be higher from 4Q onwards – Lupin

Update on Indian equity market:
Following its global peers, Indian markets continued to rally for the 5th straight session as Nifty closed the day 143 points higher at 12,157. Within the index, the gainers were led by RELIANCE (3.6%), BAJAJFINSV (3.5%), and INDUSINDBK (3.3%) whereas Maruti (-2.9%), GAIL (-1.9%) and BHARTIARTL (-1.5%) were the laggards. Among the sectoral indices, PVT BANK (2.1%), BANK (1.9%), and FIN SERVICE (1.9%) led the index higher while PHARMA (-0.7%) and FMCG (-0.1%) were the only laggards.
Excerpts of an interview with Mr. Nilesh Gupta, Managing Director, Lupin with CNBC-TV18 dated 05th November 2020:
The company is witnessing growth in the US markets on the back of the launch of Albuterol. The drug is a great growth opportunity for Lupin.
The Albuterol story will really come out in 4QFY21E. The company is still in ramp-up mode. Lupin is expected to get more business in 3Q as compared to 2Q and will see a steady-state of demand from 4Q onwards.
The reason for optimism on Albuterol is a major competitor, Perrigo going out of business with no timeline of coming back.
Commenting on the re-launch of Glumetza, there were some teething problems regarding the product but management is confident about the re-launch of the drug.
The company is able to return to a $180- 200mn quarterly run rate in the US markets. The remediation costs and research and development spend in the past have started fructifying for the company.
In the Indian business, the company is expected to grow 6-8% YoY. The business has suffered in the 1st half of FY21 due to the COVID-related slowdown in demand from the acute segment. The market is expected to grow in the range of 4-5% and the company is confident of beating the industry growth rate.
Consensus Estimate: (Source: market screener website)
The closing price of Lupin was ₹ 931/- as of 05-Nov-2020. It traded at 40x/ 25x/ 21x the consensus EPS estimate of ₹ 23/ 38/ 45 for FY21E/ FY22E/ FY23E respectively.
The consensus target price of ₹ 945/- implies a P/E multiple of 21x on FY23E EPS of ₹ 45/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

COVID has created both opportunities and challenges for Pharma companies- Lupin

Update on the Indian Equity Market:

On Tuesday, Nifty closed flattish with just 0.1% gains at 11,559. Within NIFTY50, INDUSINDBK (+6.5%), M&M (+4.2%), and TATAMOTORS (+4.1%) were the top gainers, while ONGC (-1.4%), RELIANCE (-1.4%) and BAJAJAUTO (-1.3%) were the top losers. Among the sectoral indices, REALTY (+6.4%), PSU BANK (+1.1%), and AUTO (+1.0%) gained the most. FMCG (-0.3%) and IT (-0.1%) ended with losses.

COVID has created both opportunities and challenges for Pharma companies- Lupin

Excerpts of an interview with Mr. Ramesh Swaminathan, Executive Director- CFO and Head- Corporate Affairs, Lupin, published on Economic times website dated 26th August 2020:
• Lupin has the approval to manufacture generic version of ProAir- albuterol sulphate. This is a very important market for LUPIN in the inhalation space. The overall market for Ventolin, Proventil and ProAir combined is $ 1.1 bn with volume share of 44%, 9% and 47% respectively.
• The Albuterol Sulphate is a complex product and the competition expected is less. The price erosion could also be potentially lower due to lower competition.
• Lupin has been working on 12 to 15 products in the respiratory segment for the past several quarters. A large chunk of Lupin’s R&D spends is for complex generics including the inhalations portfolio, biosimilars, and complex injectables. The drugs device combination in the inhalation space makes it particularly interesting and challenging, though the mechanical trials associated with it are daunting and expensive.
• Generic ProAir is a very profitable product and Lupin will try to maximize on that considering their market share record. Even though the device itself and API will be imported, given the price stickiness, the gross margins are expected to be good.
• Apart from ProAir, Lupin has plans for several other products in the Respiratory space. Some known products include Fostair in the EU market, first to file in terms of Spiriva which could be in FY23, Dulera in FY22 and a host of other products.
• Generic market in the US has been witnessing a decline. What was potentially a $67 bn market 3-4 years ago has come down to $ 57-58 bn levels. Companies which were at the top have come down in terms of market share whereas Indian companies have been ramping up. But there is a lot of potential in other emerging markets. The good thing about any generic portfolio is that it can be levered across various markets.
• Lupin’s US revenue of $ 155-158 mn in 1QFY21 was an aberration and they expect to bounce back from those levels 2QFY21E onward. Lupin had a stroke of bad luck with metformin and that would also be back by the end of 2QFY21. Products like Albuterol lined up will help Lupinto be back into the revenue levels seen over the last several quarters.
• Covid has brought in opportunities for Pharma companies but also posed a lot of challenges to the supply chain. One of the opportunities is the Albuterol market itself which is growing at 13%. But in general, the topline has been impacted across markets.
• In case of India, after virtually no growth in 1QFY21, July was okay, and in August Lupin reached the same levels as last year and expect things to pick up September onwards.
• Both acute and chronic in the US have declined and markets like Philippines or Latin America, Mexico in particular, have been significantly impacted.
• Sales promotion and travel expenses have certainly come down. Lupin is also exploring newer ways of promoting their products with doctors in India as well as overseas.

Consensus Estimate (Source: market screenerwebsite)
• The closing price of LUPIN was ₹ 983/- as of 27-Aug-2020. It traded at 44.6x/ 35.2x/ 28.7x the consensus EPS estimate of ₹ 25.7/ 37.6/ 47.1 for FY21E/ FY22E/ FY23E respectively.
• The consensus target price of ₹ 882/- implies a PE multiple of 18.7x on FY23E EPS of ₹ 47.1/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Pharma needs more government sops to ramp up API production – LUPIN

Update on Indian equity market:

Nifty started the week on a positive note, ending 56 points higher at 11,270. Within NIFTY50, CIPLA (9.5%), M&M (4.9%) and LT (4.8%) were the top gainers while EICHERMOT (-2.2%), ASIANPAINT (-1.2%) and MARUTI (-1.2%) were the top losers. All the sectoral indices closed the day in green led by PHARMA (5.5%), REALTY (2.8%), and IT (1.0%).

Excerpts of an interview with Mr.Nilesh Gupta, Managing Director, Lupin published in Mint dated 10th August 2020:

  • In the April-June quarter, the company was able to show improvement in margins even though the sales were down. Mr Gupta mentioned that margins were a function of the savings that the company was able to make in this quarter and he expects it to be sustainable even as business picks up.
  • The biggest savings came from SG&A (selling, general & administrative expenses). The company has planned to adopt a more digital approach in how they promote to doctors. 
  • In the specialty segment, Solosec (anti-infective) sales were impacted due to pandemic. The company had to cut down the sales force to a third. It has reduced the cash burn significantly. Other specialty products like NaMuscla and biosimilars like Etanercept will not get impacted in the same way and the company is continuing with its plans.
  • In case of APIs, the company was able to pass on input price increases to customers. The move away from China also opened opportunities for companies from other geographies including Lupin. The last two to three years has seen a resurgence of API and it still remains a great opportunity. The industry needs support from the government to ramp up the facilities.
  • The recent order from the US government will affect the revenues of essential medicines. Lupin has manufacturing in the US and can set up plants anywhere in the world. The order is not an individual company issue but has implications for India.

Consensus Estimate: (Source: market screener website)

  • The closing price of LUPIN was  968/- as of 10-Aug-2020. It traded at 37x/ 25x/ 21x the consensus EPS estimate of 26.1/ 38.2/ 46.5 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 865/- implies a PE multiple of 19x on FY23E EPS of ₹ 46.5.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Replacing China as a global chemical supplier is a medium to long term story- Lupin

Update on the Indian Equity Market:

 

On Tuesday, Nifty closed marginally lower at 10,302. Within NIFTY50, SHREECEM (+3.1%), MARUTI (+2.7%), and ICICIBANK (+2.6%) were the top gainers, while BPCL(-2.5%), POWERGRID (-1.9%) and SUNPHARMA (-1.9%) were the top losers. Among the sectoral indices, AUTO (+1.1%), FMCG (+0.3%), and FIN SERVICE (+0.3%) gained the most.  PSU BANK (-1.8%), MEDIA (-1.7%) and PHARMA (-1.5%) were the losing sectors.

 

Replacing China as a global chemical supplier is a medium to long term story- Lupin

 

Excerpts of an interview with Mr. Ramesh Swaminathan, Global CFO –Lupinpublished in Economic Times dated26thJune 2020:

  • The US Generic market has seen different phases in terms of pricing in the last 2 decades. Pricing was good during 2001-2005. In the 2005-2009 period, there was a sharp decline in prices which picked up later. 2011-2015 saw some tailwinds for pricing. 2015 onward due to customer consolidation and increased competition in generic space, the Pharma companies lost bargaining power leading to pricing pressure. However today, the situation has stabilized and everything depends on the portfolio.
  • There have been a lot of Indian generic entrants in the US generic space and that is where the competition is higher. US companies such as Teva, Mylan, and Sandoz have lost market share to the new entrants. But the smaller companies are now realizing that earning ROCE is not as easy. Companies have to invest in FDA approved manufacturing facilities of different kinds, there is a waiting period for getting ANDA approvals, and there is a working capital blockage. As a result, some players are backing out which will bring some pricing stability going forward.
  • In the last several years, Lupin, along with the other bigger companies, is focusing on delivering more complex generics including complex injectables, inhalation, etc. Complex injectables as a segment are growing at over 6-7%. Inhalations segment is growing at over 15%. These segments have lower competition because of the complexity involved.
  • In the specialty segment, a lot of the products are coming into the market over the next few years, which will help with the realizations for Indian generic companies. Companies need to have deep pockets because Specialty calls for a very different kind of approach. Innovation quotient and clinical data play a critical part.
  • Biosimilars is the sunrise industry for Indian pharma companies. There are considerable entry barriers, but once a company has a clone, has done immunogenicity studies well and, then potentially development risk will be mitigated. The pricing will also be better due to lower competition. Europe has adapted more to biosimilars. Once the American market picks up, the realization for players in that market would be much higher.
  • Lupin has got into women’s health because that is one space which has been vacated by big pharma and to that extent, the competition there is much lower.
  • Replacing China as a chemical producer for the world will be a medium to long term story. India has about 25% of USFDA approved API capacities in the world but there is still some way to go when it comes to supply. The government is trying to encourage this shift but the investments have to materialize.
  • There are 3 specific growth drivers for Indian pharma companies. One is the large American market, specifically the complex products which Lupin is also getting into. Second, the Indian domestic market is still underpenetrated. Due to the COVID-19 situation, there is going to be thrust from the Indian government and more public awareness which will aid faster growth. Third, many emerging markets are underpenetrated and if the portfolio is right, there is potential for growth in those markets.
  • There might be some demand contraction in India as well as America due to COVID-19 disruption. However, it is a very temporary situation and the second half of FY21E will be much better.
  • The flavor of the day seems to be a nationalistic foot forward. We can see in India as well as in America and other parts of the world. Lupin has been conscious about this for a while and has local manufacturing in countries where it operates. For Indian pharma companies, the basic paradigm should be low-cost manufacturing from India but supplemented with local manufacturing capabilities in overseas markets.

Consensus Estimate: (Source: market screener website)

  • The closing price of lupin was ₹ 910/- as of 30-June-2020. It traded at 31.9x/ 23.4x the consensus EPS estimate of ₹ 28.5/ 38.9 for FY21E/ FY22E respectively.
  • Consensus target price of ₹ 852/- implies a PE multiple of 21.9x on FY22E EPS of ₹ 38.9.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”