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Price rise, drug nod to boost Lupin

Costlier diabetes drug, big launches; analysts upgrade earnings estimates

Ujjval Jauhari 

Lupin's Goa facility
Lupin's Goa facility

On a day when the broader stock indices remained volatile and closed marginally higher, Lupin gained 3.55 per cent to close at Rs 1,989.45. News of Lupin announcing a 200 per cent price rise in the US for the generics of diabetes-treatment drug Fortamet boosted sentiment. In this segment, where there are only two generic players, Lupin has 60 per cent market share. The product’s market size is estimated at $100-130 million. Sarabjeet Kour Nangra of Angel Broking, who earlier estimated a $43-million contribution from the product, now says the product will record $70-80 million in revenue.

ALSO READ: Lupin launches first ever variant of anti-depressant drug Duloxetine ALSO READ: Lupin: Product approval from Goa plant removes key overhang Analysts had anticipated the price increase, following a huge price rise for competing product Glumetza. But even after the 200 per cent price rise, the Fortamet generics will be 75 per cent cheaper than Glumetza. The price increase will also boost Lupin’s operating profits and earnings per share (EPS). Nangra estimates a 225-basis-point rise in the company’s operating profit margin, and a rise of 13 per cent and 12 per cent in the EPS in FY16 and FY17, respectively. Product launches, expected in the second half of this financial year, will also provide a boost to earnings.

Lupin has secured a first-to-file for the launch of the Glumetza generics and is believed to have settled for its launch by February’16. Analysts at Morgan Stanley estimate a $100-million upside for Lupin during the 180-day exclusivity period after the launch, assuming 50 per cent price erosion and 40 per cent market share. After the exclusivity period, the generics are estimated to contribute $100 million a year to Lupin’s revenues. Price rise, drug nod to boost Lupin Many big launches are pending approvals. Generics of gastro treatment drug Nexium, kidney treatment drugs Renagel and Ranvela, cholesterol-lowering drug Welchol, oral contraceptive Ortho Tri-Cyclen 28 and antibacterial Azithromycin are likely to boost to Lupin’s performance from the end of this financial year. Analysts at Nomura say high-impact approvals will drive earnings from the last quarter of FY16, while analysts at HSBC anticipate key approvals through the next six months. While Nomura and HSBC have upgraded their price targets for Lupin to Rs 2,149 and Rs 2,002, respectively, in the past few days, Morgan Stanley upgraded its price target to Rs 2,227 on Thursday, after the drug price increase. Morgan Stanley analysts say Lupin’s near-term US pipeline is being bolstered, which could mean a 50 per cent EPS rise next financial year. They have raised their EPS estimate for fy17 from Rs 73.1 to Rs 89.1.

First Published: Fri, September 25 2015. 02:35 IST
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