ValuePickr Forum

Lupin - Is it the time to buy for long term

Q1FY19 results indicate that pain is still not over for Lupin. Views of veterans would be highly appreciated.

Discl. Tracking.

I am not a veteran ;-), but I think it all depends on how well a couple of their specialty drugs/biosimilars do.

For instance, next quarter, we will probably know how well Solosec is doing. I recall reading that they have a couple of other crucial biosimilars launching this year. Any revenue growth and margin expansion, I believe, will be fully dependent on these.

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Good news lupin shareholders :

http://www.lupin.com/lupins-nagpur-facility-receives-establishment-investigation-report-eir-from-us-fda.php

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Lupin’s Nagpur facility inspection by US FDA concluded with no observation

Mumbai, September 14, 2018: Pharma major Lupin announced today the successful completion of an
inspection carried out by the US FDA at its Nagpur, Maharashtra, India facility. The inspection concluded
without any observation. This inspection was a product specific pre-approval inspection.
Lupin’s Nagpurfacility is the company’s latestsite and manufactures Oral Solid Dosage products. The site also
houses Lupin’s state of the art injectable manufacturing facility.

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Every Re 1 depreciation results in Rs 40 crore profit for company, says Lupin

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Nice thread, My personal feel on this is that due to aberrant behaviour of pharmaceutical companies both domestic (eg Ranbaxy and perhaps some others, where a large amount of data was apparently falsified to get FDA approval or other cases where short cuts were taken in matters of hygiene etc) as well as international the USFDA has cracked down on all companies. Maybe India has taken more of the hit, not sure about China & others but definitely things have tightened up. This coupled with the oligopolistic buying by pharma chains has put the industry in the doghouse for the past 2-3 years.

While everyone may not be able to make the cut, improvement of manufacturing processes is something that one can expect good managements should be able to do over a period of time. Recent clearances for Sun/ Lupin seem to indicate things may be getting better.

Pharma in today’s markets is one of the few sectors which is not overpriced, and one should also note that withthe stronger regulatory regime the entry barrier for a new company to get this kind of scale also increases so if these companies make that transition, there is good possibility of rerating for good managements.

Disc - Invested recently

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Don’t know what has plagued this company. :thinking:
This is the 4th negative action against company’s plants after Indore, Goa, Mandideep.

Earlier actions are not getting resolved while consultant costs will keep rising apart from obvious revenue loss.

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There has been a lawsuit filed against a lot of generic drug companies in the US by 44 states, accusing them of raising prices unfairly in an anticompetitive manner: is this why pharma companies were down today?

The toughest period is behind us, says Lupin’s Vinita Gupta

India’s third-largest generic drugmaker Lupin is focussing on building a pipeline of specialty drugs, while cutting costs and addressing regulatory concerns.

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One more bad news.

Lupin not learning from its previous FDA warnings at other plants.

https://blog.fdazilla.com/2019/10/pharma-repeat-deficiencies-in-lupin-limited-warning-letters/

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Q2 results are out, exceptional item played a spoiler or else there is some YoY recovery

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Exceptional Item refers to following,

During the quarter, the Company made provision of USD 53.5 million (Rs 3,791.8 million) to be paid towards the settlement amount in respect of State of Texas lawsuit in the USA which is disclosed as an exceptional item. The exceptional item of Rs 3,399.8 million for the year ended March 31, 2019 pertains to provision for fine to European Commission.

Seems they get such issues frequently which dents the Bottom line

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Exactly. They seem to get these issues so frequently that the quarter in which they don’t make any extra ordinary provisions would be rare and one of a kind.

Disc: Invested.

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Lupin announced divestment of its Japanese subsidiary at a EV/sales of ~2 times while the company itself trades at an EV/sales ~2.3 times. The proceeds from this transaction will help bring down its borrowings significantly, post which the net D/E will come down to ~0.1. With this sale, Lupin will exit the generic business from Japan but will continue with its speciality portfolio in Japan. The sale is expected to be completed by March 2020.


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