Another disappointing set of numbers from Lupin, the only positive is they have managed to scale back US quarterly revenues to $200mn+ on back of their respiratory products. Flu season didn’t happen again leading to inventory write-off (cannot blame management here). Additionally, they got metformin returns from retailers which was an extraordinary item. These extraordinary items have now been the case for last 3 years, even management is only guiding for a margin comeback (to 20% levels) in FY24. One positive was their US respiratory business which is firing on all cylinders, they have got significant market share in albuterol now. Everything else looks bad, maybe its priced in (who knows!). Here are my notes.
- US growth strong ($202mn quarterly runrate). Growth has been on inhalation portfolio, oral solids have de-grown
- gSpiriva: Responded to CRL. Expect late H2FY23 launch. Settlement done
- Gross margin shrink is due to raw material inflation and change in product mix
- Adjusting for one time effects, margins were ~13.7%. For next two quarters, margins will stay at these levels. Only expect uptick in Q3FY23 and should go above 20% in FY24. In FY23, company will be trying to build market share in key products and the impact will only be visible in FY24
- One time effects were return of metformin from retailers, inventory write-off on flu products as there has been no flu season
- Domestic: IPM chronic grew by 10.2% and Lupin’s chronic division grew at 10.2%. 35% of Lupin’s business is acute and rest is chronic
- No products from Mandideep, Tarapur and Pithampur are important in terms of product filings and they are prepared for audit. Somerset is expected to take longer
Disclosure: Invested (position size here)