Lupin gains 2% on Symbiomix acquisition; brokerages hail move
Believe that the buyout could enrich its pipeline and there could be some recovery going forward for the company.
Lupin gained around 2 percent intraday on Thursday as investors cheered its acquisition move. Multiple brokerages too gave their thumbs up to the buyout.
The company agreed to buy US-based Symbiomix Therapeutics for USD 150 million, said it expects "significant" cash flows from the deal in the next three years.
The acquisition gives Lupin control over Symbiomix’s lead product, Solosec oral granules, for the treatment of bacterial vaginosis in adult women. In September this year, the USFDA approved the drug for marketing with 10 year exclusivity.
“This transaction is an important milestone in the evolution of our specialty business and gives Lupin a new therapeutic to bring to obstetricians and gynecologists to treat a serious health condition they see frequently in their practices,” Vinita Gupta, chief executive officer of Lupin, said.
Lupin expects Solosec to be commercially available by mid-2018. The product has been designated as a Qualified Infectious Disease Product (QIDP) by the US Food and Drug Administration (FDA). QIDP designation is for medications intended to treat serious or life-threatening infections. This status makes Solosec eligible for at least 10 years of exclusivity in the US.
Lupin said it will target 6 million annual prescriptions and each prescription of existing treatment costs USD 150-250. The addressable market for the drug stands around USD 800 million- USD 1 billion.
Lupin said it also seek approval for more indications to expand the revenue base of the drug.
The acquisition of Symbiomix and its brand Solosec significantly expands Lupin’s presence in branded women’s health specialty business, which at present markets postpartum hemorrhage Methergine tablets.
Moneycontrol lists out what brokerages are talking about the issue.
Brokerage: UBS | Rating: Buy | Target: Rs 1,135
The global research firm said that it sees limited triggers in near-term as key generic launches pushed to FY19. Additionally, there could be near term pricing pressure on US business, which could remain high.
Brokerage: Morgan Stanley | Rating: Overweight | Target: Rs 1,224
The global research firm said that the Symbiomix acquisition will enrich specialty pipeline. In fact, the company could add new indications and expand the market non-US and EU geographies. It expects the company to reach peak sales in about three years.
Brokerage: ICICI Securities | Rating: Buy | Target: Rs 1,280
The brokerage house expects the base business growth and margin to pick up FY19 onwards. It also expects 11.3 percent revenue & 19.7% PAT CAGR over FY18-20. Regulatory hurdles, higher than expected competition in the US are downside risks for the stock.
Brokerage: Motilal Oswal | Rating: Buy | Target: Rs 1,215
Motilal Oswal expects recovery in the second half and the stock is factoring in most concerns. Having said that pricing pressure and new competition in Metformin could keep the US business in check. It also believes that the sales could bottom in the second quarter of this fiscal. Motilal Oswal also expects key launches & ramp-up in specialty business portfolio to drive earnings.
Brokerage: CLSA | Rating: Outperform | Target: Raised to Rs 1,180The brokerage house said that Symbiomix acquisition could boost women health specialty business. The company derives 20% of its core US sales from women’s healthcare and more deals in women health business space can be expected, it added.