Lupin dips 3% as US FDA issues warning letter for Tarapur facility

Lupin said it does not believe the warning letter will have an impact on disruption of supplies or the existing revenues from operations of this facility

Shares of Lupin dipped 3 per cent to Rs 652 on the BSE in Thursday's intra-day trade after the company received warning letter for its Tarapur, Maharashtra facility. During the past four trading days, the stock gained 3.4 per cent in an otherwise weak market.

Lupin, in an exchange filing today, said it has received a warning letter from the United States Food and Drug Administration (USFDA) for the company’s Tarapur, Maharashtra, facility after they inspected site from March 22, 2022 to April 4, 2022.

The company said it does not believe that the warning letter will have an impact on disruption of supplies or the existing revenues from operations of this facility. The company further said it is committed to addressing the concerns raised by the US FDA, and will work with the Authority to resolve these issues at the earliest.

"We uphold quality and compliance issues with utmost importance and remain committed to be compliant with CGMP quality standards across all our facilities," Lupin said.

At 10:40 AM, the stock was trading 2 per cent lower at Rs 659.30, as compared to 0.52 per cent rise in the S&P BSE Sensex. In the past six months, the stock plunged 13 per cent, as against 2 per cent decline in the benchmark index. Further, in the past one year, the stock tanked 30 per cent as compared to 4 per cent decline in the Sensex. Lupin hit a 52-week low of Rs 583 on May 25, 2022.

In April-June quarter (Q1FY23), Lupin's revenue declined by 15 per cent YoY, and 7 per cent QOQ to Rs 3,600 crore on account of US revenue, which declined 33 per cent QoQ to $121 million (-30 per cent YoY), impacted by cut down inventories, shelf stock adjustments on few products, and continued price erosion.

"The current valuation is favorable and company expects growth, and margin recovery from Q2 onwards led by gSuprep and gSpiriva and cost optimization measures, execution has been weak (lack of new launches, price erosions, higher costs)," analysts at Centrum Broking had said in a result update.

Lupin has delivered a disappointing Q1, driven by weak margin performance largely due to lower sales in its key markets. After being cautious on the stock, we see risk-reward has turned favorable with margin being at worst level, cost savings measures and expectation of rebound in US business, hence, we recommend 'ADD' on the stock with a target price of Rs 700 on 20x FY24 EPS, the brokerage firm said.

"We believe that the sales and earnings pressure have been bottomed out and now we can expect Lupin for a comeback, however the performance have been at worst given lower margin and weak sales, along with positive outlook led by key launches gave us the confidence to remain hopeful on Lupin," it said.