Improved US growth outlook drives Lupin stock prices to 52-week high

The stock has gained almost 67% since the end of March. New launches in the US during the last quarter and lower competitive intensity in the base business lifted the company’s overall Q1 FY24 performance as it returned to profits compared to loss in the year-ago quarter, adding to confidence.  

Lupin has been also able to resolve regulatory issues with the US drug regulator (USFDA) recently pertaining to two manufacturing facilities in Goa and Indore that had remained under US scanner for long. These clearances are likely to help aid multiple product launches in the US markets, improving the company’s growth outlook in the world’s largest pharmaceutical market.   

Lupin’s revenues from the US markets, contributing to 34% to overall revenues, grew 57.4% year-on-year and 2.6% sequentially during Q1 FY24. The company had received four new drug approvals for launches by the USFDA and launched three products in the quarter in the US, taking the total number of generic products in the US markets to 158. Analysts said that the company’s base business performance is likely to have remained strong with lower pricing pressure. However, the company in June also launched the HIV treatment product Prezista generics with 180 days exclusivity for one dosage strength.  

Prior to generics entry, the Rezista had $301 million in sales and Lupin’s generic launch is likely to contribute well to its earnings during ensuing quarters.   

Meanwhile, the clearance of the company’s two manufacturing facilities by the USFDA would mean products filed from these facilities pending approvals will also start getting a nod for launch by the US FDA.   

Analysts at Prabhudas Lilladher said that the recent clearance of Pithampur unit two will aid five-six niche ophthalmic product launches including that of Prolensa generics where the company enjoys First-to-file (FTF) status. The FTF status allows the company to get a six-month exclusivity on launch of the product before competition enters.  

Meanwhile, the generics of respiratory product Spiriva could also see a launch in Q2 FY24, said analysts. Analysts at Jefferies India Pvt Ltd said that the addressable market as per Lupin is $1 billion despite innovator moving prescriptions to Respimat (another respiratory inhaler). Market share gains will be gradual, and Jefferies has assumed sales of //$36 million $117 million in FY24 and 25 respiratory//. However, the same is with 70% Ebitda margins, as per Jefferies. The launch thereby will be strong for earnings.  

As the outlook for the US markets improves, domestic performance by the company also has remained decent. Contributing 35% to overall, the company’s India formulation revenues grew 10.8% sequentially and 9.8% year-on-year during Q1.  

Following good Q1 performance and US prospects, analysts have been raising their earnings estimates. Analysts at Motilal Oswal Financial Services have increased their earnings estimate by 7% and 5% for FY24 and FY25, respectively, factoring superior growth in domestic formulation segment, healthy product launches in US generics, and lower tax rate.   

Those at Jefferies too, factoring in Q1 FY24 results and favorable pricing dynamics for generic drugs in the US, have increased FY24-26 EPS by 25-58%.  

However, after a strong run-up in stock prices, some analysts remain cautious about stock valuations. Those at ICICI Securities said that the stock trades at a pricey 28x FY25 earnings. Even analysts at Jefferies said that Lupin’s stock has rallied more than 25% since generic Spiriva approval in June and is trading at 29x FY25 and 24x FY26 earnings which leaves little room for slippage in gSpiriva ramp-up or improvement in core business. 

Updated: 08 Aug 2023, 01:16 AM IST