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Shares of Lupin fell 4.7 percent intraday Friday (in addition to 2.5 percent decline in previous session) after the brokerage Nomura downgraded the stock to neutral, citing slower US sales growth. Target price reduced to Rs 1,661 from Rs 1,738.
According to the brokerage, slower US sales growth and high R&D spend will slowdown earnings growth in FY16F.
Lupin’s US generic sales have recorded a CAGR of 32 percent over FY12-15, with an average annual increase in sales of USD 160 million.
Nomura expects average annual increase to sustain at these levels over FY16-17F, implying a slower growth rate on a larger base. It expects key ANDA approvals/launches (Nexium, Welchol, Renvela, Glumetza) in FY16F.
However, any upside from new launches will likely be negated by erosion in some high-value products such as Fortamet, which contributes 14 percent of FY15 generic sales; and pricing pressure due to customer consolidation, said the brokerage in its note.
Nomura expects Lupin's US brand business sales to fall to USD 52 million in FY16F, from USD 145 million in FY12.
According to the report, the earlier-than-expected generic competition for Suprax and Antara has been a negative surprise. The brokerage feels Lupin may pursue acquisition to scale up the brand business near term.
An acquisition may be marginally earnings accretive in the near term, but it is less certain of considerable value accretion, said Nomura.
On Wednesday, Aurobindo Pharma received final approvals from the US Food and Drug Administration to manufacture and market Cefixime (bioequivalent to Lupin’s Suprax) for oral suspension USP, 100mg/5mL and 200mg/5mL.
At 11:38 hours IST, the scrip of Lupin was quoting at Rs 1,822.45, down Rs 75.55, or 3.98 percent on the BSE.
Posted by Sunil Shankar Matkar
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