US pipeline to keep pharma major Lupin's revenues on healthy trajectory

The stock of pharma major Lupin is up 14 per cent over the last eight trading sessions and is trading at Rs 1,406 a share. The gains are on expectations that margins will improve

The stock of pharma major Lupin is up 14 per cent over the last eight trading sessions and is trading at Rs 1,406 apiece. The gains are on expectations that margins will improve on the back of limited competition launches in the US and strong growth in the domestic market.

Given the triggers, some brokerages have increased their earnings per share estimates sharply, with the quantum rising the most in FY2026.

A key trigger for the stock is the launch of the generic version of Spiriva used in the treatment of chronic obstructive pulmonary disorder.

The company got the approval for the drug and launched it in the US market in Q2FY24.

It is gaining market share which is at 24 per cent after 18 weeks of the launch.

Given the lack of an authorised generic, the company expects to improve its market share without facing major pricing erosion over the next couple of years (till FY26).

Sharekhan Research has built in $95 million of sales from the drug in FY25 and $100 million in sales from it in FY26.

Higher US sales are likely to aid in improving its operating profit margins to 21 per cent in FY2026 from 13 per cent margin in FY2022. The brokerage has upgraded its price target to Rs 1,500 a share.

In addition, the company is strengthening its respiratory portfolio through acquisitions.

Last month it signed an asset purchase agreement with Sanofi, which entailed acquiring a portfolio of products in Europe and Canada.

Through the deal, the company acquired the Aarane brand in Germany and Nalcrom in Canada and the Netherlands for Rs 53.7 crore.

The company highlighted that the proposed transaction is of strategic interest and brings accretive assets in the respiratory field to help structure the new respiratory franchise in Germany following the launch of Luforbec in Germany as well as the launch of the generic version of Spiriva and the acquisition of Xopenex and Brovana in the US.

Lupin has a robust product pipeline, which is expected to boost revenues in the US market going ahead.

Analysts at Nomura Research led by Saion Mukherjee highlight that the company has been investing in complex platforms including inhalation, biosimilars, complex injectables (depot injection and peptides), and ophthalmic products.

Lupin has secured sole first-to-file positions (could lead to exclusivity on product launch) in 20 products, adds the brokerage. The brokerage has revised its earnings per share estimates upwards for FY24-FY26 by 2-14 per cent.

It has maintained a ‘buy’ rating with a target price of Rs 1,593 per share.

In the domestic market, the company is also aiming to grow faster than its peers. It has enhanced its sales force count by 1,300 and is witnessing higher sales in diabetes, cardiology, and respiratory categories.

New launches, cost control measures, and operating leverage are expected to boost margins in India's business.

Some brokerages, however, believe that the upsides from the product launches and market share gains in the US are priced into the stock. Kotak Securities has a sell rating.

While the ramp-up in Lupin’s market share in the generic version of Spiriva has been impressive until now, we believe the upside from it and any buoyancy around US generics are priced in, the brokerage said.

It has a target price of Rs 1,005 per share.