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)