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
Exactly. They seem to get these issues so frequently that the quarter in which they donât make any extra ordinary provisions would be rare and one of a kind.
Disc: Invested.
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.
https://www.bseindia.com/xml-data/corpfiling/AttachLive/c1f2d884-357f-46d4-839f-53470fa100f4.pdf
Lupin got a positive opinion from the European Medicines Agencyâs Committee for Medicinal Products for Human Use (CHMP) for its biosimilar ethanercept. This is in-line with managementâs guidance on ethanercept launch in Europe in 2020. The next step is approval from the European commission. If Lupin gets approval, it can launch the biosimilar in Europe.
On the management front, Ramesh Swaminathan rejoined as CFO, he had earlier left Lupin to join L&T.
Lupin Announces Positive Topline Results from its Phase 3 Study of Single-Dose SolosecÂŽ (secnidazole) for the Treatment of Trichomoniasis.
Here are the FY20Q4 updates. The presentation this time around is very elaborate and I will recommend going through it to understand the future pipeline into speciality and complex generics.
Regulatory updates:
)Facilities under FDA scanner continues
Results
Future plans & Guidance
Key monitorables
Lupin got approval for marketing its biosimilar Nepexto (biosimilar etanercept whose brand name is enbrel) in Europe. They got positive opinion from EMA Committee for Medicinal Products for Human Use (CHMP) on 27-03-2020. This is big news as this will be Lupinâs first biosimilar launch in Europe. The R&D of a $1bn over the last 5 years will finally start paying off.
My investment thesis in Lupin has always been that it will realize its true potential once the biosimilar and complex drug pipeline unlocks. Unlike Biocon, where we depend mostly on biologics alone, with Lupin, we have a cushion with their existing pipeline.
Well Biocon also has Syngene which is not dependent on biologics, plus they manufacture smaller molecules as well. Biologics division still doesnât account for even half of their topline.
By the way, I also think that market is mispricing Lupin. They have 2 biosimilars in pipeline, their India business is 33% of topline (5100 cr. as of FY20) growing at higher than IPM rates. It alone accounts for more than half of its market cap. Lets see how it plays out!
@harsh.beria93 - Do you have any info on the one time exceptional items from Q2 and Q3 especially from the restructuring of Gavis and impairment of Kyowa? What exactly did happen? Are the issues with Gavis better now? Are these exceptional items a huge concern? Because they seem to be getting once every alternate quarter.
As far as I remember, Gavis is the large acquisition in US that didnât work out. Numerous reasons such as opioid crisis, overpaying for acquisition, etc. More details on the video https://www.youtube.com/watch?v=HJnTg4YQygE
As far as exception charges are concerned, there was a lawsuit against generic pharma companies for price collusion which named Lupin along with other large generic companies. Some part of the exceptional charges are for settling the lawsuit. There has also been exceptional income on back of sale of Kyowaâs generic unit in Japan because of price control introduced by Japanese government. Another exceptional item was the partnership with Boehringer Ingelheim for selling their cancer drug for which they will be getting royalty (detail here). I think these are most of the exceptional items, I hope the number of such items go down in the future!
USFDA grants orphan drug status to mexiletine hydrochloride.
There is a serious unmet medical need for the management of symptoms in patients with myotonic disorders. The decision by the USFDA to grant orphan drug designation to mexiletine brings us closer to providing a licensed treatment option for patients in the US - Lupin CEO Vinita Gupta
Interesting interview of Ramesh Swaminathan (link)
Some key takeaways:
Lupin recalls some batches of metformin and expects that this scenario will not spill over to other batches. A blanket ban if it happens will be bad for lupin as they get 9-10% eps from metformin (according to cnbc).
It is only in extended release tablets⌠Standard release tablets seem to have no issue and to my understanding the standard release tablets are the major chunk which most diabetes , women with PCOS are prescribedâŚ
I may be wrong⌠May be some doctors can confirmâŚ
Discl: not invested⌠Tracking
All pharma companies those who make Metformin ( almost all pharma companies in india make metformin), they make both in Standard and Extended release formâŚ
Not a big issue in my viewâŚbecause even USA based pharma companies had also this issue of recall in extended release form of MetforminâŚ
Discl: Not invested in Lupin ⌠Tracking
So for metformin hydrochloride extended release tablets, Lupin seems to have released 500 and 1000 mg tablets (batch number A090692).
Other players in the market who have the extended form of the drug are below
You are right, it seems that every major pharma player produces metformin!
https://www.fda.gov/media/71502/download
Newly added part: Lupin also released today that they did recall the extended release tablets of 500 and 1000 mg tablets. Their own lab tests show that certain batches had higher than allowed NDMA content. They expect to reintroduce updated tablets in current quarter. (link)
CNBC interview
HiâŚ
Sharing some important highlights from LUPINs 2020 AR-
Sales - 15,142 cr vs 14,318 cr
EBITDA- 2838cr vs 2893 cr
PBT - 1505 cr vs 1745 cr
PAT - 908 cr ns 852 cr
Both PBT and PAT - adjusted for exceptional items.
Ranked -1 in Hypertensive drugs in US
Ranked-1 in 63 products in US , out of a total of 164 products
Ranked-4 in Chronic therapies in India
Ranked-4 amongst Generic players in Aus + NZL
R&D spend - 10.3 pc of revenues
Manufacturing sites -
New Jersy, Mexico, Brazil - 1 each
India- 12 sites
R&D sites -
India-2
Mexico, Brazil, Netherlands - 01 each
US- 2
Debt to Equity - down to 0.12 vs 0.38 last year ( positive development )
Divestment of Kyowa has helped reduce debt.
API sales as a percentage of total sales - 9 % ( APIs have a lot of tail winds )
Company seeing reduction in pricing pressures in US mkts. ( lets see how this pans out )
Levothyroxine ramp up in US- progressing well.
Etanercept - Biosimilar got EU approval.
Na Muscla - Speciality product ramping up well in Europe
Expects to launch first major Inhalation product- Albuterol in US in 2020-21
Expects to launch gFostair ( limited competition product ) in US
Ramp up of Solosec- sub par. Company has high hopes from this speciality product
India business grew 13 % - 34 pc of company sales. Now, the company has 10 products among top 300 vs 6 produsts 3 yrs ago
All USFDA in last 2 Qts went off well. Lets see if the company can resolve the pending sites
A lot of talk about cost control, throughout the AR
EBITDA for 2019-20 at 18.7%- subpar by company admission
US growth-3 %- 38 pc of company revenues.
Apart from regular ANDAs, company has a descent pipeline of FTFs, Injectables and inhalation products
Intends to launch Pegfilgrastim in US in FY 21- first US-biosimilar launch for the comapny
In India, Lupin is No-1 in anti TB meds, 2nd in respiratory and 3rd in anti- diabetes meds and cariology meds
Company intends to ramp up India OTC products- Softovac, Lupizyme and Aptivate
Lupin is Ranked 2nd in Mexico in Opthalmology. Mexico is a fast growing, large pharma mkt
Besides Brazil and Mexico, company has recently entered Chile , Peru and Columbia
Company intends to enter cardio, pain management and CNS segments in Mexico ( to diversify beyond opthalmology )
Lupin has 2.1 pc Mkt share in Brazil ( 15th largest )- grew 28 pc last year
Company intends to enter similar segments as in Mexico
Asia - Pacific, Latin America - 4 pc of sales each
Divested Kyowa ( Japnese Subsidiary )
Intends to launch complex generics and biosimilars in Japan via marketing tie-ups
Launched Etanercept ( bio similar ) in Japan
Australia rank-4 amongst generic players
Phillipines rank-5 amongst generic players
Intends to launch complex generics and injectables in both Mkts
EMEA, Europe, Middle East and Africa- europe growth last yr-13 pc, intends to launch first respiratory produsct- fostair in europe, fast growth in South Africa specially in OTC and CVS products
APIs-
06 manufacturing sites
9 pc of sales over and above the captive consumption
Biosimilar pipeline-
Pegfilgrastim - helps increase production of WBCs
Ranibizumab - helps prevent decreased vision and blindness
Aflibercept- oncology drug
These notes are not exaustive. However, cover imp highlights.
Key monitorables -
The street is sick of exceptional items. Lets hope, not many are in store now.
Pricing scenario in US business.
Scale up of complex generics, speciality and bio-similar portfolio
Domestic performance
Sucess of cost control measures.
Disc: invested.
Small portion of portfolio.
AR20 notes below
USA (38% of sales; growth of 3%):
India (34% of sales; growth of 13%):
Specialty pipeline and biosimilars:
EMEA (8% revenues) â Europe, Middle east and Africa
LATAM (4% revenues; 12% growth):
APAC (4% of sales; 8.4% growth):
New chemical identity (NCE) pipeline (1% revenue):
API business (9% revenue):
