Lupin - Is it the time to buy for long term

ET interview

  • US generics market has de-grown from $67bn to $57bn in last 5 years, more competition from smaller Indian companies taking market share in commodity generics
  • Aurobindo has been a huge winner in terms of market share in last five years
  • Got albuterol approval as per guidance; Proair market growing by 13% backed by COVID tailwinds; price erosion will be lower
  • Q1 revenue of $155mn was an aberration; US revenues will be back to $180-200mn quarter levels
  • Metformin to be launched by this quarter end

Perrigo recalls albuterol sulfate inhalation (a generic for proair). Cipla launched albuterol sulfate earlier this year, Lupin will launch this month. There might be a temporary spike in Lupin’s revenues for the next couple of quarters because Lupin is the only one apart from Perrigo and Teva (innovator) who makes proair. Cipla only makes proventil (and not proair). For context, the albuterol market has three large brands (proair, proventil and ventolin). Proair sales account for $1.3bn out of the $2.9bn albuterol sulfate market. Another interesting development is that Lupin is planning to shift its manufacturing of proair to US. This is in-line with management commentary of transferring important healthcare products to US.


While researching about animal healthcare market, I found that Lupin recently got an approval to make Albendazole tablets (anthelmintic drug used for animal pharma). I have never heard Lupin’s management commentary into animal healthcare, does anyone have insights into this? Or maybe it is simply because of the temporary demand-supply mismatch of albendazole which is why its prices went up quite a bit. Just thinking out loud here.

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Albendazole is used for even humans. It is not for animals :slight_smile:


Here are my notes from today’s concall:

  • Excluding last time NCE licensing income, sales were slightly up YOY (by ~3%; not sure about number)
  • India sales growth should be 6-8% YOY in H2FY21 (IPM should grow 4-5% in H2FY21); chronic part has done well but acute is lagging (bigger brands have done better and Lupin doesn’t have big brands in acute);
  • Overall sales growth will be ~10% in H2FY21
  • Q4 EBITDA margins will be back to ~18.5% and EBITDA margins should come back to 20-22% in few quarters; gross margins will go up going forward because of flu products (Tamiflu etc.) and also higher sales from products such as albuterol and ramp up of levothyroxine; Manpower costs should be 18% of sales going forward
  • Levothyroxine: 13% market share currently from the 12% in last quarter; 16% market share in generic market
  • A large chunk of the remediation costs are done, waiting for the FDA audits (currently FDA is not having virtual audits)
  • Launch of albuterol and relaunch of glumetza (metformin) were done at the end of quarter
  • Albuterol: Ramping up supply due to very strong demand because of supply shortage due to perrigo recall; pricing is holding up as Lupin is the only generic for proair; Expect complete ramp up (with sales >1mn units/month) from Q4FY21; Harder to ram up as product has a complex supply chain due to 3rd party vendors in the supply chain (especially for the medical device);
  • gSpiriva: Is in constant dialogue with the FDA; product launch date is after June 2022 (positive that will get approval by then); not aware of any other company that has made significant development on the product
  • Fostair: Approval should come next quarter from MHRA
  • Solosec: Business was down 50% due to covid and restructuring of manpower (reducing number of people from 120 to 45). Scrips and revenues were flat from FY21Q1 to FY21Q2; Majority of revenues is coming from one time product use only
  • Injectable portfolio: Should ramp up in the next 3 years (4 target areas: peptide, iron chloride, depo injectables out of Netherlands (like provera); Liposomal product from Fordoz); Will first file the peptide product glemeremex (hopes to launch in FY22); Liposomal products will be launched in FY24 & FY25
  • Near term growth will be driven by inhaler portfolio
  • Somerset inspection: Still ongoing; Longer inspection in COVID times + facility had a COVID positive case leading to a 2-week hiatus
  • Quality action plan: Observations from any regulatory body will be addressed across sites; Was launched in July 2020; Gives example of how problems in “investigations” have been addressed across manufacturing sites
  • Flu season has been delayed
  • Other regulatory bodies such as DGCA have done virtual desktop audits
  • FDA might start asking to compare impurity data from the reference drug during approval of injectable products

Disclosure: Invested (position size here)


Here are my notes from the last couple of management interactions.

30-12-2020 (CNBC)

  • 12 launches till date; FY22 will be much better in terms of sales than FY21
  • Number of platforms that Lupin has been working on is one of the highest in the industry (complex generics, injectable, inhalers, biosimilar, specialty)
  • Q4FY21 EBITDA margins should be >20%
  • Somerset inspection went badly

13-01-2021 (JP Morgan)

  • 16 ANDA approvals and 13 FDA filings in CY20
  • Albuterol market share stands at 8% of generic market share in Q3FY21 (is manufactured at Pithampur)
  • Somerset inspection was challenging
  • Expect to file 1 out of the 2 liposomal product in partnership with ForDoz
  • Have one of the largest portfolio of in-licensed products that are sold in India
  • Aim to move from the current rank of 6 to 3 in the Indian pharma market over the next few years
  • Have invested substantially in 3 major areas – inhalation, biosimilar & long acting complex injectables
  • Specialty business: women health in US and Canada; gastrointestinal in Canada, neurology in Europe

Disclosure: Invested (position size here)


Here are my notes from today’s concall.

  • Stable price situation (low single digit price erosion) in US currently
  • EBITDA margins (excluding forex exchanges) improved to 20.6% and operating EBITDA improved to 18.6% due to improved business mix and cost optimization. Forex loss was ~26 cr. for this quarter. Targeting EBITDA margins of 20-22%
  • Flu product demand was very low due to the weakest flu season in a decade leading to low growth in US
  • API has done poorly because demand for antibiotics product has been very low globally
  • Effective tax rate have improved to 15.9% as most of subsidiaries have done well. For the whole year, it will be in mid-30s. For next year, it will be sub-30s
  • Solosec: Most of the benefit due to rationalization of sales force have been recorded
  • Albuterol: Ramp up has gone well with monthly market share of 9%+ of the generic market. Hope to get to 20%+ market share in the next couple of quarters. Market is 70mn units and Lupin is targeting 14-15mn units (is capable of higher numbers). Is manufactured at Pithampur Unit III
  • gSpiriva: Litigation is on-going and FDA filing is on-going, queries from FDA is normal IRs. Expect to launch in mid CY 2022
  • Fostair: Branded product; Expect FDA approval in the next couple of months. Have been inspected for this in the past; Expect district court decision within a year. Is manufactured at Pithampur Unit III and Coral Spring facility
  • Levothyroxine: Currently at 17% generic market share and 14% of overall market; Want to go up to 20% market share of the generic market (i.e. 300 bps more)
  • Complex injectables: Depo products out of Netherlands ready to go into clinic (first product will go into clinic this quarter; next one will follow soon). Fordoz liposomal: expect at least 1 filing in the next fiscal year; Peptides: Will file one of the products in the next couple of months
  • Ranibizumab: Will go into Phase III this year
  • Etanercept: Ramp up has been slow with launch in 3 EU markets so far because it’s kind of a branded product; Expect product to be rolled out in all key markets in 12-24 months
  • Goa, Pithampur and Tarapur: Ready for inspection; Expect FDA visits to only happen in H2CY22
  • Somerset observations: Unhappy with 13 observations, was a tough and very long inspection, wouldn’t generalize with other facilities. Deeper transformation program initiated. Still work to be done on the compliance front
  • Mandideep, Pithampur: Have a very deep transformation program
  • R&D will remain at 9% for FY22
  • Company is now qualifying US sites for government products
  • Expect 6+ injectable filings each year; 3-4 inhalation products; total 30-35 ANDA filings to US each year
  • Branded US sales was $2mn this quarter (40 people sales force)
  • Brazil operations is now profitable
  • Nebule product are outsourced (contract manufactured)

Disclosure: Invested and position size same as before


Novitium gets approval for famotidine (oral suspension). This is a big product for Lupin with FY21 sales of >$180mn (estimates from Jefferies).

Disclosure: Invested (position size here)

What is What is In-Licensing?

Under the license agreement, the two companies will take on the development and commercialization of ciraparantag in Europe, Australia and New Zealand. The drug candidate is targeted for the reversal of the anticoagulant effect of direct oral anticoagulants and low molecular weight heparin in patients who use these products and need emergency surgery or are experiencing life-threatening uncontrolled bleeding. Ciraparamtag restores the body’s ability to form blood clots.

The presentation made by vinita in jp morgan healthcare conference is available on lupin -investor -presentation section and on youtube.
Has some broad colour on companies focus areas, plans, audit etc.
Worth al ook. Not pasting the link here as not sure on copyrights.

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Here are my notes from the Q4FY21 concall.

  • Products on shelf: Reduced from 174 to 168. Portfolio rationalization is behind now, price erosion is much more controlled (at single digits) and hope that it persists
  • Very poor flu season in US impacted revenue (~$36mn). Despite that, Q4 US sales came at $195mn (compared to $212mn in Q4FY20 and $188mn in Q3FY21). Sequential uptick was due to albuterol and levothyroxine ramp up.
  • EBITDA margins have improved sequentially to 18.8% sales vs 18.6% in FY21Q3. Expect margins of 19-20% in FY22 and base margins should be 20-22% by FY23. Margins will spike up to 26-27% when a complex product is launched and then come back to base levels of 20-22%
  • Gross margins came at 65.1% (driven by albuterol) and higher write-offs due to weak flu season
  • For FY22, inhalation portfolio will kick in (brovana, perforomist). Experiencing additional challenge for famotidine.
  • Guidance: Expect 10% US sales growth in FY22. Goal is to get to $1bn+ US sales by FY23. India should grow in double digits
  • Extremely committed for the business and not willing to sell out
  • India: Acute product sales have grown this quarter. Growth was at 5.9% vs 8.5 IPM for Q4FY21 (IQVIA). For FY21, Lupin grew at 3.9% vs IPM of 4.3% (IQVIA).In chronic, Lupin grew at 10.2% vs 8.4% IPM growth. Now, 65% of sales are chronic in nature. Field force stands at 7700. Should see double digit growth in FY22.
  • In chronic therapy, focus is on diabetes, cardiovascular, and respiratory. Diabetes is growing the fastest among chronic therapies (20%+). Highly under indexed in women’s health, vitamins and supplements, dermatology and will launch products in these categories
  • Albuterol: Has ramped up further and made the supplies, IQVIA reported market share at only 8% levels as IQVIA numbers are lagging supplies. Haven’t seen shift to Sandoz. Pricing has been stable thus far. Hope to build-up market share to 20% levels (by end of FY22)
  • gSpiriva: In process of responding to FDA, have got priority review, expect approval and launch in FY23. Litigation should be settled in FY22, expect court proceedings to pick up pace in September 2021
  • gFostair: Made significant progress with UK agency and expect approval soon (to be launched in the next couple of months)
  • gBrovana: Material product for FY22
  • Levothyroxine: Currently at 18.7% of generic market share. Started FY21 at 15% of generic market share
  • Metformin: At 50%+ share in glumetza (with reduced pricing to gain back market share). Yet to launch fortamet
  • Biosimilars: Filed 1st product (pegfilgrastim) in USA but the facility has not been inspected. Should be launched in 15-18 month timeframe.
  • Etanercept: Launched in Germany + Austria + eastern Europe. Seen revenue growth QoQ. France is yet to happen.
  • Revlimid: Looking to launch in 2022
  • Specialty portfolio: Major product will be trick for women health division (H2FY22)
  • API: Lower sales due to lower antibiotic sales and a weak flu season. API generate lower gross margins but have similar to the corporate level EBITDA margin
  • Employee expenses: Came lower also due to a one-off, in which they had provided for higher expense for sales incentives which didn’t come through and thus Lupin wrote back that amount. Expect to be <18% of sales going forward
  • Effective tax rate came down in FY22 with Brazil and USA entities returning to profitability. Expect it to remain at 27-28% in FY22
  • Inspections: FDA has come up with remote inspection guidelines, hope to get remote inspection soon. Pithampur Unit II required a deeper fix which was done. Tarapur and Goa sites did not require deeper fix.
  • R&D: At 9% level in FY21 and this will decline going forward. Complex generics (inhalation + injectable) + biosimilars expenses were front-ended. Inhalation portfolio is paying off. Injectable portfolio (with iron + peptide + liposomal + depot) will start contributing in the next 2-3 years (from FY23). Biosimilars will start contributing in the next couple of years. 5-years ahead: complex generics will be the biggest revenue and margin drivers
  • Debt: Repaid Gavis loans
  • CAPEX: Will be ~1000 cr. in FY21
  • FY21 working capital was ~145 days. Want to bring it down to 100-120 days

Disclosure: Invested (position size here)


The query on promoter seriousness was a shocker/ dampener. There is no smoke without a fire.

found the promoters slightly shaky vis-a- vis the gung ho agressive attitude in previous calls. Most of the timelines of launches were extended over previous estimates.

Nice to see a VP asking questions in the concall.


trying to make some sense out of the pipeline indicated till now, inhalation looks with limited competition to play out in 1-2 yr, while biosimilar looks crowded and fda approvals are at least 2-3 yr off in most cases, very low visibility on injectables as it is little far out as well.
enbrel mkt size is only for eu.

s no drug name type likely launch by lupin mkt size competition including innovator remarks ( target mkt)
1 albuterol inhalation launched 400 perrigo gsk, teva , 3 authorised generics in albuterol
2 fostair inhalation 2-3 months uk mkt
3 spiriva inhaler FY23 3000 boehringer, patent expiry fy 20
4 brovana inhaler FY 22 500 sunovion patent expiry fy 20
5 dulera inhaler Fy 22 400 merck patent expiry fy 20
6 etanercept (enbrel) biosimilar launched 1500 pfizer/amgen,sandoz, samsung wyeth, in india-- cipla, intas approved in eu and launched in few eu markets and japan
7 filgrastim ( neupogen) biosimilar 785 hexal, pfizer,apotex, several others launched in india,
8 pegfilgrastim biosimilar filed in US launch by FY 23 950 coherus, mylan, biocon, novartis, pfizer, sandoz, DRL,Zydus,emcure and cipla launched in india,
9 ranibizumab ( lucentis) biosimilar FY 25 1200 roche ( innovator)coherus, and 2 more in process
10 denosumab ( prolia, xgeva) biosimilar ? 6000 amgen (innovator),no biosimilar in pipeline, 6 biosimilar in process , lupin not in sight
11 pertuzumab ( perjeta) biosimilar ? 3000 genetech innovator, no biosimilar approved, 6 biosimilar in pipeline, lupin not in first lot
12 afibercept ( eylea) biosimilar 4000 regeneron , none approved but several biosimilar in pipeline, lupin not visible in first lot recvd 3.5 mn usd
13 namuscula launched 10 approved in EU and US
14 malt1 NCE abbvie recvd 30 mn usd upfront for development
15 MEK NCE boehringer recvd 20 mn usd
16 doxil injectables FY 24 1000 J &J, SRS,Sun, cadila,merck, cipla, pfizer, DRL/natco For-doz doz pharma, mktg by lupin
17 ambiosome injectables FY 25 For-doz doz pharma, mktg by lupin
18 provera female health

Lupin’s novel drug program seems to be on track. They concluded their third milestone payment ($50 mn for MEK product with Boehringer). Here is a broad timeline of the major developments thus far.

  • NCE program is focused on oncology, immunology, and metabolic disorders
  • MALT1 AbbVie partnership (Q3FY19): Received $30 mn upfront, milestone payments upto $947 mn + royalty on sales
  • MEK Boehringer partnership:
    o MEK inhibitor compound is planned for clinical development in combination with Boehringer Ingelheim’s KRAS inhibitor pipeline to address KRAS-driven cancers
    o 04-09-2021: Received $20 mn upfront, milestone payments up to $700 mn + double digit royalty on sales
    o 27-05-2021: Received $50 mn milestone payment

Disclosure: Invested (position size here)

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Have reduced my exposure to lupin since majority of their launches are after fy 24. Except for inhaler like spiriva, dolera and fostair.

Also perrigo is expected to be back anytime now with pro air which will dent the albuterol sales.

Have added tisco the logic for same is in bhushan thread.

Inviting comments

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A couple of updates:

  • gBrovana has been launched in US, this is their second respiratory product after gProair. The other major US launch for FY22 is perforomist, hasn’t got approval yet.
  • Application for pegfilgrastim has been filed in US, they will be the 6th player in the market. Price erosion is >40% over the last 3-years and the current biosimilar adoption is ~36% of overall market. Biocon has struggled getting barely 8% market share since launch (in Sept 2018).

Disclosure: Invested (position size same as before)


Warning letter issued to Somerset facility.

Disclosure: Invested

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