Lupin Ltd investors have heaved a sigh of relief. It’s crucial respiratory drug gSpiriva HandiHaler (Tiotropium bromide inhalation powder) received a final approval from the US Food and Drug Administration (USFDA) on Wednesday. Note this nod has come earlier than management’s expectations of July-August this year.
In reaction, the stock surged to a new 52-week high of ₹885.30 on Wednesday. This approval gives Lupin’s US revenue prospects a shot in the arm and is margin accretive too. Lupin is expected to garner annual sales of $80-100 million from gSpiriva in FY24/FY25, said a Motilal Oswal Financial Services Ltd report.
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Remember, the US market had been a pain for Lupin with high competition eroding price, regulatory issues at the plant and lack of new product laun-ches. Thankfully, business star-ted to improve in H2FY23 with ramp-up in sales of new products and a favourable product mix. In March quarter the company’s US revenue grew 9.5% year-on-year (y-o-y) to ₹1,550 crore. As of now, Lupin is the only company in the market with gSpiriva (in the generic segment), this would work in Lupin’s favour, at least over the next two-three years, said analysts. “We expect gSpiriva’s contribution to Lupin’s FY2024-26E overall earnings per share to be very significant at 17-21%. If there is no authorized generic launch by the innovator, the opportunity for Lupin could be even higher,” said Kotak Institutional Equities report. While investors need to be aware of competition that Lupin faces in gSpiriva, for now, that worry is for another day. Some analysts expect gSpiriva to be launched in Q2FY24. Now, Lupin stock gave up some of Wednesday’s gains closing down 2.6% on Thursday. There could be concerns around company’s execution skills. “The company’s execution had been patchy in the last two-three years. So, its execution with gSpiriva along with sustainable launches in FY24 and margin improvement in their base business (excluding gSpiriva) are important factors to monitor,” said Param Desai, analyst, Prabhudas Lilladher. Apart from gSpiriva, Lupin has multiple launches in the pipeline, particularly in its niche business of injectables and inhalers. Although this is positive for sentiment, but after the sharp run-up of 39% in the last one year the stock’s valuations have become pricey. Kotak analysts believe that at current market price, the upside from gSpiriva is priced in. The brokerage is cautious on the stock given slim medium-term US pipeline beyond gSpiriva and subpar margin profile.
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Updated: 22 Jun 2023, 11:30 PM IST