Lupin, Cipla to benefit from Perrigo’s recall of asthma drug albuterol sulphate MDI in the US

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Lupin and Cipla are expected to benefit as rival Perrigo recalls its albuterol sulfate metered dose inhalers (MDI) in the US. In fact, Perrigo has stopped the production and distribution if the MDIs due to clogging of devices.

Albuterol sulfate MDI, sold under brand names Proair, Proventil and Ventolin, is a bronchodilator used for opening up airways, or brongi, in the lungs to provide relief to asthma patients.

The Dublin-based Perrigo said that the company stopped the production and distribution of the MDIs and has issued a recall “out of an abundance of caution as a result of complaints that some units may not dispense due to clogging.”

No sales since August 2020

The inhalers are manufactured by Catalent Pharma Solutions, and there have been no sales since August 2020, Perrigo said.

Perrigo said corrective action plans are under way, but didn’t provide a definitive timeline for product reintroduction. The company estimates that it would take an $18-22 million charge against earnings in the third quarter, and expects no further sales of albuterol MDIs this year.

Perrigo has an 11-12 percent market share in the albuterol market, with of $73 million sales in  Q2 of CY20 in the US.

“The development is positive for Lupin, which launched its ProAir generic in September 2020, and would have benefitted from the lack of generic competition, as well as Cipla, which can target aggressive market share, given Perrigo's absence,” said Kotak Securities in its latest report.

Kotak cautions saying the development also highlights the consistent thesis of the product being tricky to scale.

Cipla, Lupin gain

Shares of Lupin and Cipla have gained on account of Perrigo’s recall.

Cipla shares gained 7.51 percent and were trading at Rs 808.50 on BSE, while Lupin shares were trading Rs 1112.30, up by 7.16 percent, at 11.55 am on Friday.

Neuland Laboratories, which supplies the active pharmaceutical ingredient (API) for Albuterol Sulfate to Lupin, too, saw its shares gain 5.3 percent to Rs 1,183.50.

In April this year, Cipla became the first company to receive USFDA approval to sell generic ProAir (albuterol sulphate) MDI, while Lupin received approval in August. Lupin is expected to launch the drug this month.

Albuterol Sulfate sales for two innovators GSK and Teva for their brands Ventolin and Proair stood at $600 million and $275 million for the 12 months ended June 2020 in the US. The Albuterol market is worth $1 billion and there are 72 million devices on sale in the US.

Lupin and Cipla compete with Perrigo’s and three other authorised generic (AG) competitors, other than innovators, for the albuterol sulfate market.

“Despite the three AGs in the market, given Perrigo's exit, we expect a prolonged steady pricing scenario for albuterol," said Kotak Securities in its report.

“We currently forecast $83 million sales for Lupin in FY2022. Similarly, we forecast $90 million and $120 million for Cipla in FY2021/22, with the potential for a 10 percent upside, and see a $20-50 million upside risks to both, depending on manufacturing scale-up and the relaunch timing of Perrigo," the report added.

Kotak expects pricing to stabilise at $8-10 per device over the medium term.

“While Cipla launched gProventil in April, Lupin’s gProAir launch is expected this month. We build in $40 million and $60 million in sales in FY21 for Lupin & Cipla, respectively. If Perrigo’s relaunch is delayed, the opportunity for Lupin & Cipla will rise further,” said Macquarie in a report.

Perrigo doesn't sell in India. In India, Cipla, Lupin, and GSK are the major players.