News Analysis

Lupin: Long-term US prospects remain positive

Dhuraivel Gunasekaran | Updated on January 12, 2018 Published on May 25, 2017

lupin

In spite of sluggish approvals by FDA and heightened consolidation, Lupin holds the 4th largest USFDA ANDA pipeline

The shares of Lupin dropped by over 9 per cent and touched its 52 -week low in trading on Thursday, after the company reported a year- on-year (y-o-y) decline of 49.2 per cent in its net profit in the fourth quarter. The company reported a consolidated net profit of Rs. 380 crore in March 2017 quarter as against Rs. 748 crore seen in the same period last year. This steep fall is mainly attributable to erosion of base business in US coupled with a one-time provisioning on account of patent litigation over generic oral contraceptive drug in Australia. Higher foreign exchange volatility also impacted the earnings. The consolidated net sales for the quarter increased by 1.3 per cent to Rs. 4,162 crore, from Rs. 4,109 crore in the same period in the last year. Lupin’s operating profit for fourth quarter decreased by 39 per cent y-o-y to Rs. 827 crore.

Muted US growth

The company's US sales for fourth quarter came in at USD 276 mn, which represents a 15 per cent y-o-y fall.

The US market accounts for about half the company’s total revenues. The company had registered strong growth in this market earlier, thanks to the growing opportunity in the generic space. However, the recent quarter witnessed decline in the revenue due to base business price erosion and structural concerns on consolidation amongst the channel partners. The profits from key products such as generic Fortamet, Glumetza and Tricor witnessed sharp fall due to competition. The consolidation of Gavis also registered disappointing growth due to lack of meaningful product approvals from USFDA. Though the management has guided for 30 plus product approvals in FY18, the US business will be impacted over short-term by the continued channel consolidation and increased competition.

Stable performance in other geographies

India sales for fourth quarter came in at Rs 879 crore, which represents a 14 per cent y-oy increase.Japan reported strong growth of 35 per cent y-o-y in the fourth quarter on the back of strong support from Shionogi products. Europe registered better growth of 23 per cent y-o-y during fourth quarter, thanks to the expansion in partner businesses.

Outlook

Despite muted performace in the March 2017 quarter, long-term prospects for the US business is sanguine. For one, in spite of sluggish approvals by FDA and heightened consolidation, Lupin holds the 4th largest USFDA ANDA pipeline. The company has 154 ANDA filings pending with a record 37 filings and 34 approvals in FY17. The company has received 214 approvals to date. The company now has 45 First-to-Files (FTF) filings including 23 exclusive FTF opportunities. Cumulative DMF filings stood at 187 as of March 31, 2017. The company is also focusing on building a pipeline in niche products with limited competition and high barriers, such as inhalation, biosimilars and complex injectables. There are more than 400 products in pipeline. The company is targeting a total US business of ~ USD 200 billion.

Published on May 25, 2017

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