Management was also quite disappointed with the results, here are my notes from the conference call
- Adverse product mix in US mainly responsible for bad performance along with loss of metformin revenues; Saw demand contraction due to higher stocked up inventory in March; Biggest drop was because of flu season products like Erythromycin; Will be back to $180-190 US revenues Q3 onwards; Branded business impacted adversely in Q4FY20 and Q1FY21;
- Q2 to be much better than Q1; API growth guidance growth at 10%; Domestic business impacted in July; August has started off much better (expect growth in Q2 over Q1)
- Manpower costs increased because of speciality business restructuring and one-time COVID incentives; it will come down in the next quarter (below Q4 levels)
- EBITDA margin will be 17% for current financial year (excluding forex and other income impact)
- Albuterol (Proair is the largest brand) approval expected in August (was already expecting approval by now which was delayed because of change in the API supplier); Expect launch in September; Market has normalized (in terms of pricing) to pre-COVID levels and pricing is currently stable; Might come with a larger discount because Albuterol is a major product for them and are looking at it from a longer time perspective for a few years;
- Expect fostair approval in Europe by end of calendar year and launch by the end of fiscal year; Will be first launched in UK
- Make 20%+ margins in important products (like albuterol)
- Levothyroxine: competition coming in (eg: Strides Pharma), not easy product to ramp up so expect competitors to struggle (12% market share)
- Solosec: Demand is coming back with express scrips; Just 10% of target physician office in US is open face-to-face
- Investing in inhalation in last 6-7 years; Inhalation portfolio will start kicking in from this year
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Biosimilar:
o Launch of etanercept will be in this quarter starting with Germany;
o Expect to file pegfilgrastim by end of this financial year; Target launch in FY23;
o US biosimilars (ranibizumab, pegfilgrastim) will be marketed on own - FDA not in a position to do physical audits in India but doing inspections in US for mission critical facilities; Offered Somerset for reinspection; Pithampur and Goa will be offered for reinspection in the next couple of months;
- API business: Looking to ramp up fermentation based APIs where there is overdependence on China; Guides for 10% growth this year
- Impact of trump new rules: Not big in the US government business as the government prefers to buy from local manufacturers
- Big problem in compliance was investigation; Evaluating the scope of third party reviews; Trying to improve internal investigation
- Metformin: NDMA issues impacted multiple players in the market but not everybody; Confident of getting back into the market by Q2; Have been a very strong player over the past 5 years. Will probably not be like a SARTAN issue;
- Long term growth rates: Target is 10% CAGR (double digit) sequentially over the next 5-7 years; Target to get margins back to 20%+ over long term; Target R&D within 10% of sales
- Entered into exclusive marketing agreement with ForDoz Pharma to market two complex injectable assets (oncology, anti-infective therapeutic areas) that will be manufactured by ForDoz but sold by Lupin in US. This will bolster Lupin’s Institutional business offering. The two assets are probably Doxorubicin (will be filed next year), Amophotericin (will be filed in the year after next);
Disclosure: Invested (detailed position size here)