When Rakesh Jhunjhunwala grilled Lupin top brass after muted Q4 results

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26 Aug, 2025 12:21

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Ace investor Rakesh Jhunjhunwala of RARE Enterprises, who holds close to 1.7 percent stake in Lupin, quizzed its top brass on price erosion and falling margin after the pharma major reported 49.2 percent YoY decline in the net profit to Rs.380.2 crore in the fourth quarter ended March.

Amid regulatory headwinds from the USFDA and pricing pressure back in India, Jhunjhunwala asked about growing consolidation on the buying side in the industry and can it also extend towards sell side consolidation.

“I would expect the consolidation to continue. Many firms will struggle to meet the requirements and I would expect to see some consolidation on the supply side,” Vinita Gupta, CEO at Lupin said in a conference call.

Jhunjhunwala also asked about Lupin strategic tie-up with a Polish biopharmaceutical company, Celon Pharma.

The company entered into an agreement with a polish firm back in February 2015 to jointly develop fluticasone/salmeterol dry powder inhaler (DPI) product which is a generic version of GlaxoSmithKline’s Advair Diskus.

“We haven’t acquired the company but we got the right to the device from Celon. The rights are for countries including US, Canada, South Africa. The drug is already approved in Europe. It is the first company to get an approval for Advair generic in the developed market,” added Gupta.

She further added that we have been working with them in the last two years to get them up to USFDA standards. It has a market size of $8 billion and is off patent.

The industry is going through some consolidation because the growth is shrinking. But, the market is all about exclusive products. “If you look at the history of last 7-8 years, we have constantly expanded our margins through exclusive products with a limited number of competitors,” said Gupta.

I don’t think that the basic fundamentals have changed for Lupin. Yes, compared to the high base, we have a challenge in near term, said Gupta.

Global Brokerages slash target price:

Citigroup and CLSA have reduced their respective 12-month target price for Lupin post-March quarter results.

Additionally, Lupin received six US FDA Form 483 observations for its Indore plant, according to CNBC-TV18. The facility was inspected the US drug regulator between May 8 and May 19.

Citigroup which still maintains a buy rating on Lupin reduced its target price to Rs1630 from 1,890 earlier. The March quarter results were broadly in line with our expectations adjusted for one-time costs (forex impact, litigation loss provision), despite higher R&D spend.

“Despite an inline quarter, we cut FY18E/19E EPS by 6.7%/9.3% to build in a slightly faster pace of erosion in gGlumeta and gFortamet and the likely delay in certain key FY19 launches,” said the note. Citi also lowered target PE to 25x FY18E vs. 27x FY18E earlier to factor in higher uncertainty on the pricing environment in the US.

Asia-focussed broker, CLSA downgraded Lupin to outperform from buy earlier and has also lowered its target price to Rs1350 from Rs1760 earlier.

“Lupin‘s 4Q sales of Rs42bn remained flat on a YoY basis and Ebitda adjusted for a provision were in-line with estimates. Lupin expects a challenging FY18 due to competitive/regulatory pressures in the US and Japan,” said the CLSA note.

US concerns are on account of continued customer consolidation, incremental competition in top products, and slower-than-expected Gavis ramp-up, it said.