The recent approval to the cholesterol-lowering drug will strengthen the US portfolio and boost profits.

Lupin had a volatile December on the bourses. The stock lost more than 12 per cent in the first half of the month, after a US court put a stop on the sales of Fortamet, a drug used to manage blood sugar levels. However, the stock recovered a bit on the US Food and Drug Administration (USFDA) approval to sell the generic version of the cholesterol-reducing drug, Finofibrate. The approval is expected to add $30-40 million to Lupin’s FY13 revenues. Its earnings per share will also get a fillip of about five per cent. The stock is currently trading at 15 times its FY13 estimates and most analysts are bullish, given the growth in key markets India, US and Japan. The consensus one-year target price shows a 20 per cent upside from the current level of Rs 444.

Approval to boost numbers
Finofibrate is being marketed by Abbott under the brand name Tricor, with annual sales of $1.3 billion, according to IMS Health. The launch of a generic version of Tricor will, however, see a price erosion, as other players jump in to cash in on the opportunity. Teva and Biovail were the first to file for the launch but could not get approvals for exclusivity. Competitors such as Ranbaxy, Impax and Wockhardt have also filed for the launch of a generic version.

Analysts at J M Financial feel the Tricor launch by Teva and Ranbaxy may be delayed, leaving Impax and Biovail as potential competitors for Lupin, which is targeting a July 2012 launch. Four-five players are expected to launch the product, which could see a price erosion of around 80 per cent. In this scenario, Lupin would end up with a 20 per cent market share and gross revenues of $30 million from this drug in FY13. Limited competition would see lower price erosion, presenting an upside to their current estimates for Lupin.

Fortamet setback
Lupin had to stop the sales of Fortamet — launched on exclusivity during October 2011 — because of a preliminary injunction by the courts in favour of Shionogi Pharma, which has a patent on the product. However, Sushant Dalmia of PINC Research says that Lupin had been able to partially monetise the opportunity by filling the channels in two weeks of October. He further added that if Lupin was able to secure favourable judgment in the case, it would receive $15 million from Shionogi Pharma as part of compensation. As a result, he does not see any material impact of the loss of exclusivity for the company.

Strong US pipeline
Lupin launched seven products in the US during October-November. Analysts at Citi expect the trend to continue, given the number of filings basket likely to mature over two-three years. The quality of launches is also good, with launches on exclusivity of products such as Tramadol XR and Femcon FE (the chewable birth-control drug), they add. While the company is currently marketing three oral contraceptives, more launches are expected. Lupin targets peak sales of $100-120 million from oral contraceptives. Citi Investment Research analysts, Prashant Nair and Anshuman Gupta, estimate contributions of $50 million and $85 million in FY12 and FY13, respectively.

Chronic drug basket
Lupin is strengthening its chronic product portfolio with alliances such as the one with Eli-Lily for marketing anti-diabetic products.

Thanks to a strong chronic portfolio, it is less likely to be impacted by a heavier concentration of acute therapy drugs if the National Pharmaceutical Pricing Policy is implemented in toto. The acquisition of I’rom Pharma in Japan not only added injectibles to the company’s portfolio, but also helped increase penetration in a hospital segment that encourages low-cost generics. The contributions from Japan (the second-largest generics market after US) are likely to grow from 10 per cent of revenues before the acquisition to 15 per cent after it. Analysts at Citi say that with some larger active pharmaceutical inputs to be sourced from India next year, margins in Japan should see a reasonable expansion by end of FY13.